Implementing Project Portfolio Management by Panos Chatzipanos & Te Wu

Author:Panos Chatzipanos & Te Wu [Panos Chatzipanos]
Language: eng
Format: epub
Publisher: Project Management Institute
Published: 2018-09-20T16:00:00+00:00

8.5. Portfolio-Level Risk Approach, Processes, and Policies

With the above in mind, let's look closer at item one, portfolio-level risk approach, processes, and policies. Remember, “[t]he primary objective of Portfolio Risk Management is to make sure that portfolio components will achieve the best possible success according to the organization's strategy and business model.”61 Portfolio management involves the processes of screening, selection, balancing, implementation, and closeout of projects, programs, and operational actions to achieve strategic business goals. Portfolio-level risks will involve structural and execution risk areas associated with the above processes. From a risk perspective, the processes of screening and selection of portfolio activities to achieve business goals requires business and environmental-related risk analysis. A wide definition of environmental risk should be adopted, encompassing political, social, and governance concerns. Balancing and implementation concerns and their associated risks are addressed under the function of portfolio capability and capacity management. This topic is covered in both this book and the PfM Standard in Section 5. The following outline made of major headings from the portfolio capacity and capability management chapter of the PfM Standard provides a good starting point for portfolio-level risk sources:

PfM Standard 5.3 Capacity Management (Structural Risk Area) – The management of capacity involves human, financial, and intellectual capital, and other assets. Each of these resource categories is important to the ongoing health of the enterprise and may be a source of risks either independently or collectively. At lower levels of management, planning risks may be overcome by quick response actions, but at the portfolio level, impacts may be so significant as to make recovery difficult. Additionally, these risks generally impact enterprise-level functions and may require ERM actions. The coordination of ERM processes may result in the realization of benefits to the portfolio through the realization of positive risks. Figure 5-1, Capacity and Capability Management Components of Portfolio Management,62 shows how various components of capacity and capability management are connected. An expansion of this diagram into a causal loop diagram tailored to your organization would help identify areas of risk (both benefits and threats) that are not readily apparent.

PfM Standard 5.4 Capacity Planning (Structural Risk Area) – The overall portfolio supply and demand profile results from the capacity planning effort. The supply and demand profile is the basis for supply and demand management. Uncertain factors such as regulatory or other government measures may impact the overall portfolio supply and demand profile. The success of supply and demand management will be closely tied to the quality of the capacity planning activities. Planning risks at the portfolio level are similar to planning risks found at any level of management. A primary concern at the portfolio level is proper alignment of plans both up and down the organization.

PfM Standard 5.5 Supply and Demand Management – Risks associated with supply and demand management may be in the area of execution or structural risk depending on the organization deriving the risk. If this function is implemented under an operations organization, it would be considered in the execution risk area.

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