Portfolio Management Knowledge Areas

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Book: Portfolio Management Knowledge Areas
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Date: Thursday, 25 February 2021, 1:33 PM

Description

Portfolio Management Knowledge Areas

a


Portfolio Management Process Group and Knowledge Areas Mapping

Knowledge Areas

Defining Process Management

Aligning Process Management

Authorizing and Controlling Process Management

Portfolio Strategic Management

4.1 Develop Portfolio Strategic Plan

4.4 Manage Strategic Change

4.2 Develop Portfolio Charter

4.3 Define Portfolio Roadmap

Portfolio Governance Management

5.1 Develop Portfolio Management Plan

5.3 Optimize Portfolio

5.4 Authorize Portfolio

5.2 Define Portfolio

5.5 Provide Portfolio Oversight

Portfolio Performance Management

6.1 Develop Portfolio Performance Management Plan

6.2 Manage Supply and Demand

6.3 Manage Portfolio Value

Portfolio Communication Management

7.1 Develop Portfolio Communication Management Plan

7.2 Manage Portfolio Information

Portfolio Risk Management Overview

8.1 Develop Portfolio Risk Management Plan

8.2 Manage Portfolio Risks



















©2017 Project Management Insitute. A Guide to the Portfolio Management  - Third Edition


Defining Process Group

 

The Defining Process Group consists of those processes performed to establish how the organizational strategy and objectives Will be implemented in a portfolio; determines the portfolio strategic plan; determines the portfolio structure and roadmap; defines and authorizes a portfolio or subportfolio; and develops the portfolio management plan and subsidiary plans.

 

The Defining Process Group is most active at the time the organization identifies and updates its strategic goals, near-term budgets, and plans. Traditionally, these activities take place at the annual budgeting time or business review meetings although some organizations have more or less frequent cycles. Such activities could be scheduled quarterly, for example, or may occur because of unscheduled changes in the organization (e.g., mergers, reorganization, changes in enterprise environment factors, etc.).

 

Aligning Process Group

 

The Aligning Process Group consists of processes to manage and optimize the portfolio. This group determines how portfolio components Will be categorized, evaluated, selected for inclusion, modification, or elimination, and managed in the portfolio. The Aligning Process Group promotes and supports the portfolio based on the strategic goals of the portfolio through the operational rules for evaluating components and building the portfolio. The processes in this Process Group enable the establishment of a structured method for aligning the mix of portfolio components to the organization's strategy.

 

The Aligning Process Group is most active after the portfolio organization has defined and developed its strategic goals, near-term budgets, and plans. Traditionally, these activities are used to manage ongoing portfolio activities.

 

Authorizing and Controlling Process Group

 

The Authorizing and Controlling Process Group consists of the processes for determining how to authorize the portfolio and provides ongoing portfolio oversight. These two processes are central to all the portfolio management processes and are the process steps and activities necessary to enable the portfolio as a whole to perform to achieve metrics defined by the organization.


PORTFOLIO STRATEGIC MANAGEMENT

Portfolio Strategic Management includes the processes to develop the portfolio strategic plan, the portfolio Charter, and the portfolio roadmap and to assess and manage the alignment of these three deliverables to the organizational strategy and objectives. In addition, portfolio strategic management involves managing, monitoring, and responding to ongoing changes in organizational strategy and in portfolio components to determine appropriate actions. Actions may include a modification to strategy and goals or changes to the portfolio itself.

The Portfolio Strategic Management processes are:

4.1 Develop Portfolio Strategic Plan. —Evaluating the high-level organization strategy/investment decisions and defining the strategy in portfolio-related strategic goals and objectives in the portfolio strategic plan.

4.2 Develop Portfolio Charter. —Creating the portfolio charter and identifying the portfolio structure and portfolio management team (if applicable) to align with the portfolio strategic plan.

4.3 Define Portfolio Roadmap. —Creating a high-level schedule showing the strategic plan for components to be implemented over time with any dependencies between them so that management may evaluate any conflicts or gaps between the roadmap and the organizational strategy and objectives.

4.4 Manage Strategic Change. —Evaluating and determining the responses to ongoing changes in organization strategy or portfolio components and updating the portfolio management plan and subsidiary plans to reflect the impacts and response for portfolio management processes.

4.1 Develop Portfolio Strategic Plan

The Develop Portfolio Strategic Plan process consists of developing a portfolio strategic plan and aligning the strategic management of the portfolio to the organizational strategy and objectives. The portfolio is aligned to the organizational strategy and objectives for the corporate, organization unit, functional, or department level, based on portfolio management objectives, prioritization, allocation of funds, organizational benefits, performance expectations, resources, assumptions, constraints, dependencies, risks, and requirements.

Inputs

.1 Organizational strategy and objectives

.2 Inventory of work

.3 Portfolio process assets

.4 Organizational process assets

.5 Enterprise environmental factors

Tools & Techniques

.1 Portfolio component inventory

.2 Strategic alignment analysis

.3 Prioritization analysis

Outputs

.1 Portfolio strategic plan

.2 Portfolio

4.2 Develop Portfolio Charter

During the Develop Portfolio Charter process, the portfolio charter is created, and the portfolio structure is defined. The portfolio charter is produced through this process to authorize the portfolio manager to apply portfolio resources to portfolio components and to execute the portfolio management processes. The structure is developed based on strategies and priorities, and portfolio components are grouped to facilitate effective management. The structure identifies the portfolio, subportfolios, programs, and projects based on organization areas included, hierarchies, timelines, and goals for each program, project, and operation to align with the portfolio strategic plan.

Once the structure is defined, updates Will be needed to the strategic management plan and portfolio process assets to ensure goals and standards alignment.


Inputs

.1 Portfolio strategic plan

.2 Portfolio process assets

.3 Enterprise environmental factors

Tools & Techniques

.1 Scenario analysis

.2 Capability and capacity analysis

Outputs

.1 Portfolio strategic plan updates

.2 Portfolio charter

.3 Portfolio process assets updates 

4.3 Define Portfolio Roadmap

Portfolio roadmaps are an output of high-level portfolio planning that graphically depicts all portfolio elements needed to achieve organizational strategy and objectives. The roadmap provides a high-level plan which should then be used for identifying both internal and external dependencies. The portfolio roadmaps may contain both program level and project level roadmaps included in the scope of the portfolio. Roadmaps may not provide details of all identified portfolio components at the onset; however, they may be used to build details later.

Inputs

 

.1 Portfolio strategic plan

.2 Portfolio charter

.3 Portfolio

Tools & Techniques

.1 Interdependency analysis

.2 Cost-benefit analysis

.3 Prioritization analysis

Outputs

 

.1 Portfolio roadmap


4.4 Manage Strategic Change

The Manage Strategic Change process enables the portfolio manager to manage changes in organizational strategy and to enhance the ability to accept and act on significant strategic change that impacts portfolio planning and management.

As strategy shifts, the "as-is" state must be compared with the "to-be" state (which may be evolutionary or incremental in nature), and a gap may result in a realignment of resources or adjustments in the portfolio component mix to support the strategic change.

Change in portfolios is a normal occurrence, and, depending on the significance of the changes, portfolio documents may need to be reworked to ensure continued alignment with the strategy. This repeated adaptation is in contrast to the progressive elaboration required in project management.

This process is an aligning process to identify the gap between as-is and to-be states and to analyze the impact and response to strategic changes and changes in resources (people, processes, and assets/technology). The vehicles used to plan and execute the strategic change are the portfolio strategic plan and portfolio management plan.

Inputs 


.1 Portfolio strategic plan

.2 Portfolio charter

.3 Portfolio

.4 Portfolio roadmap

.5 Portfolio management plan

.6 Portfolio process assets

Tools & Techniques

.1 Stakeholder analysis

.2 Gap analysis

.3 Readiness assessment

Outputs

.1 Portfolio strategic plan updates

.2 Portfolio charter updates

.3 Portfolio updates

.4 Portfolio roadmap updates

.5 Portfolio management plan updates

.6 Portfolio process assets updates

Portfolio Governance Management

The Portfolio Governance Management Knowledge Area processes include portfolio oversight and how to plan for, define, optimize, and authorize the portfolio in support of overall governance body decision-making activities.

Portfolio governance management ensures that investment analysis is done to identity opportunities and threats; to assess changes, dependencies, and impact; to select, prioritize, and schedule activities to fund; and to achieve performance targets.

The Portfolio Governance Management processes are:

5.1 Develop Portfolio Management Plan—Defining portfolio components, developing the portfolio management organization structure, and creating the portfolio management plan.

5.2 Define Portfolio—Creating qualified portfolio components and organizing them for ongoing evaluation, selection, and prioritization.

5.3 Optimize Portfolio—Reviewing, analyzing, and changing portfolio components to create the optimal balance to achieve the organizational strategy and objectives.

5.4 Authorize Portfolio—Allocating resources to develop component proposals, authorizing components to expend resources and to communicate portfolio decisions.

5.5 Provide Portfolio Oversight—Monitoring the portfolio to ensure alignment with the organizational strategy and objectives; making governance decisions in response to portfolio performance, portfolio component changes, and issues and risks to ensure the delivery of the portfolio is in line with the portfolio roadmap, current progress, and conditions (including resources).

5.1 Develop Portfolio Management Plan

The Develop Portfolio Management Plan process consists of developing and updating the portfolio management plan to ensure alignment with the portfolio strategic plan objectives, the portfolio charter authorization, and the portfolio roadmap. Portfolio management plan development is an iterative process and includes the integration of subsidiary plans such as performance, communication, and risk management plans. This collection of plans may be developed concurrently or separately. The portfolio management plan establishes how a portfolio is defined, organized, optimized, and controlled. Figure 5-2 shows the inputs, tools and techniques, and outputs.

Inputs

.1 Portfolio strategic plan

.2 Portfolio charter

.3 Portfolio roadmap

.4 Portfolio process assets

.5 Organizational process assets

.6 Enterprise environmental factors

Tools & Techniques

.1 Elicitation techniques

.2 Portfolio organizational structure analysis

.3 Integration of portfolio management plans

 

Outputs

 
.1 Portfolio strategic plan updates

.2 Portfolio management plan

.3 Portfolio process assets updates

5.2 Define Portfolio

The purpose of the Define Portfolio process is to create an up-to-date list of qualified portfolio components by identifying, categorizing, scoring, and ranking portfolio components. This process is required to produce an organized portfolio for ongoing evaluation, selection, and prioritization. This process ensures resources are or Will be working on portfolio components that Will provide the most significant value for the investment and are most strongly aligned to the organizational strategy and objectives. This process is closely aligned with the Optimize Portfolio process that optimizes the portfo1io with the balanced portfolio component mix as described in Section Optimize Portfolio.

Once identified, the list of existing and proposed portfolio components needs to be organized into relevant organization groups to which a common set of decision tilters and criteria may be applied for evaluation, selection, and prioritization. The portfolio components in a given group have a common goal and are measured on the same basis regardless of their origin in the organization. The categorization of the portfolio components allows the organization to balance its investment and its risks between all strategic categories and goals.


All pertinent information is gathered and summarized for each portfolio component of the portfolio. The information may be qualitative and quantitative and comes from a variety of sources across the organization.


The portfolio manager may revise the data several times until reaching the required level of completeness. By its definition, portfolio management selects only portfolio components that align with the organizational strategy and meet defined criteria. Without a successful evaluation and definition process, unnecessary or poorly planned portfolio components may be incorporated within the portfolio and increase the workload of the organization, thus hampering the benefits realized from truly important and strategically aligned portfolio components.

Key activities within this process include:

·         Identifying qualified portfolio components through the evaluation and assignment of key descriptors,

·         Categorizing portfolio components to which a common set of decision filters and criteria may be applied, and

·         Evaluating portfolio components with a ranking and scoring model comprising weighted key criteria.

Inputs

.1 Portfolio strategic plan

.2 Portfolio charter

.3 Portfolio

.4 Portfolio roadmap

.5 Portfolio management plan

.6 Portfolio process assets

 

Tools & Techniques

 

.1 Portfolio component inventory

.2 Portfolio component categorization techniques

.3 Weighted ranking and scoring techniques


Outputs

 

.1 Portfolio updates

.2 Portfolio roadmap updates

.3 Portfolio management plan updates


5.3 Optimize Portfolio

The purpose of this process is to optimize and balance the portfolio for performance and value delivery. Portfolio optimization involves evaluating the portfolio based on the organization's selection criteria, ranking those portfolio components, and creating the portfolio component mix with the greatest potential to collectively support the organizational strategy. Portfolio optimization includes planning and allocating resources according to organizational strategy and objectives and maximizing portfolio return within the organization's predefined risk profile and tolerances. It is important to balance the portfolio with respect to the diverse goals of the organization, such as financial, organizational development and operational performance goals. This process is closely aligned with the Define Portfolio process.

Portfolio optimization evaluates trade-offs of portfolio objectives, such as the management of risk and return, balancing short-term goals against long-term goals, and balancing project types to align with the organizational strategy and objectives. Limited resources are also balanced across the portfolio to reflect strategic priorities. Portfolio components that deliver a lower level of benefit are removed from the portfolio to allow the organization to focus its resources on higher priority portfolio components that deliver more value. Optimization also incorporates groupings of portfolio components to ensure that portfolio components include all component dependencies, including cost and benefit dependencies for the entire group.

Balancing activities involves reviewing selected and prioritized portfolio components. The portfolio is then balanced to support organizational strategy and objectives using predefined portfolio management criteria, the organization's desired risk profile, portfolio performance metrics, and capacity constraints. Maintaining the portfolio "as is" or adjusting the portfolio is made at completion of the optimization activities.

Portfolio components can be balanced with one another, usually within the same category (categorization also being an attempt to balance portfolio components to address all of the diverse concerns and organizational strategy), using a variety of qualitative and quantitative methods and tools to support the decision-making process and to allocate a budget.

Key activities within this process include:

·         Assigning or reassigning, scoring, or weighting criteria for ranking portfolio components;

·         Performing risk analysis on portfolio components based on the organization's risk profile;

·         Evaluating and determining performance and expected value and benefits (financial and non-
financial) of portfolio components;

·         Determining resource (human, assets, and technology) capability, resource capacity available, and
constraints for portfolio components;

·         Determining which portfolio components should receive the highest priority within the portfolio; and

·         Identifying portfolio components to be suspended, reprioritized, or terminated based on the
balancing or rebalancing activities.

Inputs

.1 Portfolio

.2 Portfolio roadmap

.3 Portfolio management plan

.4 Portfolio reports

.5 Portfolio process assets

Tools & Techniques

.1 Capability and capacity analysis

.2 Weighted ranking and scoring techniques

.3 Quantitative and qualitative analyses

.4 Graphical analytical methods

Outputs

.1 Portfolio updates

.2 Portfolio roadmap updates

.3 Portfolio management plan updates

.4 Portfolio reports

.5 Portfolio process assets updates

5.4 Authorize Portfolio 

The purpose of this process is to activate selected portfolio components by allocating resources to develop component proposals or execute portfolio components; update relevant portfolio reports such as funding updates, resource assignments, and allocations; and document governance decisions. The changes in the portfolio and related decisions are communicated to interested parties, governing bodies, stakeholders, and portfolio, program, and project managers. Key activities within the process include: 

·        Authorizing portfolio component proposal development or portfolio component execution;

·         Allocating resources to authorized portfolio components;

·         Reallocating funding and resources from deactivated and terminated portfolio components to activated portfolio components or the resource pools; and

·         Communicating changes and decisions for the authorized portfolio components.

Inputs

 

.1 Portfolio

.2 Portfolio management plan

.3 Portfolio reports

 

TOOLS & Techniques

 

.1 Portfolio authorization process

.2 Portfolio management information system

 

Outputs

 

.1 Portfolio updates

.2 Portfolio management plan updates

.3 Portfolio reports

.4 Portfolio process assets updates

5.5 Provide Portfolio Oversight

The purpose of the Provide Portfolio Oversight process is to monitor the portfolio to ensure alignment with organizational strategy and objectives and make governance decisions in response to:

·         Portfolio performance;

·         Portfolio component proposals and changes;

·         Availability of resource (human, technology, and Other assets) capability and capacity;

·         Funding allocations and future investment requirements; and

·         Risks and issues.

Key activities within this process include:

·         Reviewing information on portfolio resources, risks, performance, and financial information;

·         Conducting recurring and nonrecurring governance meetings for reviews and decision making;

·         Ensuring compliance with organizational standards;

·         Reporting portfolio changes and information on resources, risks, performance, and financials; and

·         Communicating governance decisions.

 

Inputs

 

.1 Portfolio

.2 Portfolio roadmap

.3 Portfolio management plan

.4 Portfolio reports

.5 Portfolio process assets

 

Tools & Techniques

.1 Portfolio review meetings

.2 Elicitation techniques

 

Outputs

 

.1 Portfolio updates

.2 Portfolio management plan updates

.3 Portfolio reports

.4 Portfolio process assets updates

Portfolio Performance Management

The objective of portfolio management is to determine the optimal mix and sequencing of proposed projects to best achieve the organizational strategy and objectives. Portfolio performance management is the systematic planning, measurement, and monitoring of the portfolio's organizational value through achievement against these strategic goals (business value is explained in Section 1). In addition, the performance management process manages the sourcing of key resources such as finance, assets, and human resources to ensure optimal returns.

Organizational strategy can be expressed through the organization's vision and mission, including orientation to markets, competition, and Other environmental factors. Effective organizational strategy provides defined directions for development and growth in addition to performance measurement metrics for success. Portfolio performance management is critical in closing the gap between organizational strategy and the fulfillment of that strategy.

Organizations can further facilitate the alignment of these components by strengthening organizational enablers such as structural, cultural, technological, and human resource practices.

Through the identification of organization value areas where components are most likely to impact, the organization can clearly justify why and how investing resources in the selected projects Will benefit the organization.

Sometimes a project may affect two or three value areas simultaneously, such as increasing revenues, bringing in new customers, and increasing revenue from existing customers, Acceptance that not every Project Will be valuable to the organization is the key to making decisions, Performance metrics are the mechanism used tor targeting areas of measurement for assessing how the mix of portfolio components is performing. Quantitative qualitative, in addition to tangible and intangible, measures are used.

Examples of the quantitative measures include:

·         Increases in revenue attributable to the portfolio,

·         Decreases in cost attributable to the portfolio,

·         Change in net present value (NPV) of the portfolio,

·         Return on investment (ROI) of the portfolio,

·         Internal rate of return (IRR) of the portfolio, and

·         Percentage by which cycle times are reduced due to the portfolio.

Examples of the intangible, qualitative measures include:

·        Degree of strategic alignment,

·        Degree to which portfolio and organizational risks have been adequately managed by undertaking the portfolio components,

·        Recognition Of legal and regulatory compliance, and

·        Sustainability and corporate responsibility.

Typical attributes of projects that are collected and analyzed in a portfolio include each project's total expected cost, consumption of scarce resources (human, financial, or material), expected timeline and schedule of investment magnitude and timing of benefits to be realized, and the relationship or interdependencies Other components in the portfolio. Portfolio value is delivered when the portfolio components are utilized by the organization, community, customer, or Other portfolio beneficiaries. Benefits are sometimes not realized until long after the end of active work on a portfolio component.

Many organizations Will express progress in the form of a dashboard, which can quickly communicate status to the sponsor and stakeholders on how the portfolio is performing against expectations. In addition, reporting is communicated through variance reports, benefits realization, and resource utilization reports.

The Portfolio Performance Management processes are:

6.1 Develop Portfolio Performance Management Plan—Developing the performance management plan as to how portfolio value is defined and realized through the portfolio measurements and targets, alignment to organizational strategy and objectives, and roles and responsibilities in executing the plan.

6.2 Manage Supply and Demand—identifying and allocating the required portfolio resources capacity and capabilities according to each component proposal or plan.

6.3 Manage Portfolio Value—Measuring, capturing, validating, and reporting portfolio value at an aggregate level delivered by portfolio components with the goal of maximizing return on investment (within an acceptable level of risk).

6.1 Develop Portfolio Performance Management Plan

The portfolio performance management plan is a subsidiary plan of the portfolio management plan or a component of the portfolio management plan. it explains how portfolio value is defined and details how portfolio components are allocated for financial, human, and material or equipment resources. Performance planning starts with reviewing the Portfolio goals set in the portfolio strategic plan, and the set to reach these goals. Performance management a discipline for measuring and analyzing progress against goals to determine if changes to objectives, metrics, or to the portfolio component mix need to be made. Recommendations for changes are based on performance, in resource capability or capacity (constraints), benefits realization, assumptions, dependencies, or risks.

Portfolio resource management planning determines how resource capacity will be managed against resource utilization and changing demand to ensure a portfolio component mix generates maximum value. The performance management plan also defines the parameters and sets acceptable ranges for optimal resource capacity utilization such as insourcing versus outsourcing levels, funding levels based on financial leverage, and risk exposure policies.

Portfolio value planning covers how the realization of benefits associated with the portfolio components are tracked and optimized for maximum organization value. Organization value is more than just economic value, in that it includes revenue growth and increased operating margins. It also includes Other forms of value, such as employee or customer satisfaction, contribution to the community, enhancement or protection of reputation, and branding, integrity of the organization's products or services, or protection of environmental resources.

Portfolio reporting Will focus on providing stakeholders and the governing body with metrics to determine whether the portfolio is meeting the organizational strategy and objectives. It should enable the portfolio sponsors to quickly the status of the portfolio's progress in achieving the expected benefits.

To a lesser degree, portfolio reporting Will also provide those responsible for executing portfolio components with meaningful information on the status of the respective portfolio components in the context of other components and the overall portfolio. This level of portfolio reporting is important to optimize resource utilization against organizational priorities.

The performance management plan documents how the organization plans to measure, monitor, control and report (1) portfolio performance, (2) resource management, and (3) portfolio value.

Inputs

 

.1 Portfolio management plan

.2 Portfolio process assets

.3 Organizational process assets

.4 Enterprise environmental factors

 

Tools & Techniques

 

.1 Elicitation techniques

.2 Portfolio management information system

.3 Capability and capacity analysis

 

Outputs

 

.1 Portfolio management plan updates

.2 Portfolio process assets updates

6.2 Manage Supply and Demand

The required portfolio resources, according to each initiative's business case or plan, should be identified, and an inventory of resources and capabilities should be aggregated at the proper level of detail. This demand is then mapped to existing organizational resources: funds, Other tangible and intangible assets, as well as key human resources, such as program and project managers and subject matter experts. A master schedule of resource allocation is necessary to plan the consolidated demand of portfolio resources.

The term "supply" refers to resource capacity including funding and staffing resources as well as equipment and Other physical assets shared among portfolio components. "Demand" is the resource requirement from the portfolio components and from the component proposals requesting resources. The goal in managing supply and demand is to ensure resource capacity is optimally allocated against resource requirements or demand based on known organizational priorities and potential value. Resources should be allocated to minimize both unused capacity and unmet demand. The ideal outcome requires diligent, iterative resource management and optimization processes.

There are two primary approaches to balancing supply and demand. Some organizations may assume unlimited resources, and resources can be procured through various channels to meet any demand. These are typically projectized organizations. Other organizations are resource-constrained, where resources can be available within a range of variability. These organizations are more often functional or matrix organizations. In functional and matrix organizations, labor resources often are utilized on both project work and operational work. Fluctuations in operational workload Will have an impact on the availability of resources for work managed within the portfolio.

There is a complex relationship between the types of resource supplies. The capability and productivity of human resources, even when training, background, and experience are equitable can vary widely. Labor rates can vary based on skill set, experience, industry, and physical location of the resources. Labor resources can be hired or contracted. Equipment and physical assets can be purchased or leased and made available locally or remotely.

Every organization has bottleneck resources, which are skill sets needed on many projects but are in short supply. Bottleneck resources are typically those with an understanding of the business processes, and they also have technical or functional knowledge with the ability to translate business requirements and evaluate the impact of changes. These are skill sets that are difficult to hire or contract due to their scarcity and specific organizational knowledge required. Specialized equipment or facilities can also be bottleneck resources. The demand for these resources needs to be managed continuously. It can be difficult to accurately determine the demand for resources across a portfolio of projects, programs, and operations, at a point in the life cycle before detailed planning has occurred. As portfolio components are selected and planning is conducted, new information regarding resource requirements is often learned.

In order to maximize the use of resources, organizations Will commit resources to authorized portfolio components, based on the expected end date of an active portfolio component (commonly referred to as "soft booking"). Unexpected delays or unrecognized dependencies between portfolio components can result in situations where a resource is not available when expected.

Continual and ongoing monitoring of the supply and demand relationship is critical to the success of the portfolio. Information regarding resource utilization and changing resource requirements of active portfolio components as well as the resource needs for planned and approved portfolio components are analyzed against the availability of resources. Then the resources are allocated in a way so that the right resources may be identified and matched to the right projects at the right time. When resources are constrained, the organization is unable to accomplish planned components and may need to reprioritize. Figure 6-5 shows the inputs, tools and techniques, and outputs. Figure 6-6 shows the data flow diagram.

Inputs

 

.1 Portfolio

.2 Portfolio management plan

.3 Portfolio reports

 

Tools & Techniques

 

.1 Scenario analysis

.2 Quantitative and qualitative analysis

.3 Capability and capacity analysis

 

Outputs

 

.1 Portfolio updates

.2 Portfolio management plan updates

.3 Portfolio reports

6.3 Manage Portfolio Value

Portfolio value for an organization can be expressed in multiple ways, including by revenue growth, increased operating margins, employee or customer satisfaction, contribution to the community, enhancement or protection of reputation and branding, and protection of environmental resources. Portfolio value is defined as the aggregate value delivered by the portfolio components, and the goal is to deliver the maximum value possible aligned with strategic objectives and with an acceptable level of risk based on the risk tolerance of the organization.

The method of defining value can differ among organizations. A value measurement framework is often helpful in organizing the value that is to be created, how value Will be measured, and recognizing the possible types of value, including both tangible and intangible benefits. The measurement framework facilitates comparison of expected value across the various components and supports informed portfolio decision making for authorizing those components with the maximum expected net value to the organization. The net value considers the expected gross benefits or value minus the required investment of time and resources.

During the optimization process, component proposals provide initial assessments of expected business value and the (often intangible) contributions to organizational objectives. The expected value to be returned by the portfolio component is a significant attribute of the weighting and scoring leading to authorization. Once authorized, accountability for delivering the consequent value is assigned. Also, expected value Will continue to be measured throughout the component's life cycle.

The expected value of components can change as portfolio components are planned, developed, and executed. Changes in actual scope, schedule, cost, or performance can affect the expected value. External factors such as market conditions, competitor actions, laws and regulations, risks realized, and Other factors can also affect whether the expected value at delivery of the products, services, or assets created or enhanced has changed.

As components are completed and the organization begins to realize the consequential benefits and value, measures are again taken to ensure that the intended benefits are gained, and value is realized. The process to formally measure achieved portfolio value against expected portfolio value ensures that the portfolio continues to drive the correct work into the portfolio, organizational objectives are being achieved, and estimates for value are being established correctly in the component proposals. The value measurement framework is continuously improved by lessons learned through execution.

Outputs from this process include recommendations for changes to the portfolio and information to enable more effective and efficient decision making in the organization.

Inputs


.1 Portfolio roadmap

.2 Portfolio management plan

.3 Portfolio reports

 

Tools & Techniques

 

.1 Elicitation techniques

.2 Value scoring and measurement analysis

.3 Benefits realization analysis

 

Outputs

 

.1 Portfolio management plan updates

.2 Portfolio reports

.3 Portfolio process assets updates

Portfolio Communication Management

The Portfolio Communication Management Knowledge Area includes the processes to develop the portfolio communication management plan and manage portfolio information. Portfolio communication management processes are closely aligned with strategic, governance, performance, and risk management processes.

Selecting a communication strategy is focused on satisfying the most important information needs of stakeholders so that effective portfolio decisions are made, and organizational objectives are met. Transparency may be a communication strategy to mitigate the risk of inadequate communication. Transparency with priorities and status may provide credibility for the portfolio manager, establish good relationships with stakeholders, and help reduce the chance of resources working on efforts not aligned with the organizational strategy and objectives.

7.1 Develop Portfolio Communication Management Plan—includes portfolio stakeholders' identification as well as planning effective solutions to satisfy the communication requirements.

7.2 Manage Portfolio Information—Executes the communication plan by collecting data, translating data into meaningful information, and supplying it to the identified stakeholders in a timely and effective manner.

7.1 Develop Portfolio Communication Management Plan

Figure provides an overview of communication management including stakeholder and communication requirements analysis, the focus of consultation and participation of stakeholders for identifying risks, and the flow and input of communication management to portfolio information and reporting.


 

Portfolio communication facilitates a two-way effective dialogue between affected internal and external stakeholders, individuals, or groups, including:

·         Executive managers,

·         Operations managers,

·         Governing bodies,

·         Sponsors,

·         Project/program/portfolio managers,

·         Suppliers and external resource providers,

·         Regulatory bodies, and

·         Others.

In order to develop the portfolio communication management plan, stakeholder identification and analysis is necessary in addition to the determination ot communication requirements.

In planning portfolio communication, the portfolio management plan may identity some of the primary stakeholders, such as executive managers and sponsors, who are accountable for the success of the portfolio. Planning may uncover additional stakeholders that require or benefit from the knowledge of portfolio progress, performance, and changes. These additional discoveries are reflected as updates to the portfolio management plan. As a comprehensive list of stakeholders is compiled, it important to determine their information needs and the preferred mode of communication. Developing a strong communication management plan requires inputs from a variety of other portfolio management processes, such as performance and risk management.

Portfolio communication recognizes the broad and varied stakeholders from executive management through individuals performing the basic tasks to third parties. The information needs of portfolio stakeholders are much more varied than with project-level communication primarily because of the breadth and variety of stakeholders. Transparency in planning portfolio management reporting is important for discovering early if elements are missing and to manage risk due to insufficient or inconsistent communication. Transparent communication is also valuable when planning tor optimal utilization of resources.

Inputs

.1 Portfolio

.2 Portfolio roadmap

.3 Portfolio management plan

.4 Portfolio reports

.5 Portfolio process assets

 

Tools & Techniques

 

.1 Stakeholder analysis

.2 Elicitation techniques

.3 Communication requirements analysis

 

Outputs

.1 Portfolio management plan updates

.2 Portfolio process assets updates

7.2 Manage Portfolio Information

The process to manage portfolio information includes collecting, analyzing, storing, and delivering portfolio information to stakeholders in accordance with their requirements in a timely manner. In managing portfolio information, communication is delivered to the intended audiences through various communication mechanisms. Many communications are also stored for a period of time in portfolio repositories for future access.

When using web portal dashboards to communicate status, processes need to be created and managed to ensure updates are accurate and timely. If the portfolio management capability is not sufficiently mature in the organization, spreadsheets may be used to ensure accuracy for PMIS rather than an automated tool.

Inputs

 

.1 Portfolio

.2 Portfolio management plan

.3 Portfolio reports

.4 Portfolio component reports

5 Portfolio process assets

 

Tools & Techniques

 

.1 Elicitation techniques

.2 Portfolio management information system

.3 Communication requirements analysis

.4 Communication methods

 

Outputs

 

.1 Portfolio management plan updates

.2 Portfolio reports

.3 Portfolio process assets updates

7.3 Determine Budget

Inputs

1. Project management plan

Cost management plan

Resource management plan

Scope baseline

2. Project documents

Basis of estimates

Cost estimates

Project Schedule

Risk register

3. Business documents

Business case

Benefits management plan

4. Agreements

5. Enterprise environmental factors

6. Organizational process assets

Tools & Techniques

1. Expert judgment

2. Cost aggregation

3. Data analysis

4. Historical information review

Reserve analysis

5. Funding limit reconciliation

6. Financing

Outputs

1. Cost baseline

2. Project funding requirements

3. Project documents updates

Cost estimates

Project Schedule

Risk register


7.4 Control Costs

Inputs

1. Project management plan

Cost management plan

Cost baseline

Performance measurement baseline

2. Project documents

Lessons learned register

3. Project funding requirements

4. Work performance data

5. Organizational process assets

Tools & Techniques

1. Expert judgment

2. Data analysis

Earned value analysis

Variance analysis

Trend analysis

Reserve analysis

3. To-complete performance index

4. Project management information system

Outputs

1. Work performance information

2. Cost forecasts

3. Change requests

4. Project management plan updates

Cost management plan

Cost baseline

Performance measurement baseline

5. Project documents updates

Assumption log

Basis of estimates

Cost estimates

Lessons learned register

Risk register


Portfolio Risk Management

Portfolio risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives. A risk may have one or more causes and, if it occurs, the corresponding effects may have a positive or negative impact on one or more portfolio success criteria.

Risk management is a structured process for assessing and analyzing portfolio risks with the goal of capitalizing on the potential opportunities and mitigating those events, activities, or circumstances which can adversely impact the portfolio. Risk management is critical where interdependencies exist between high-priority portfolio components, where the cost of portfolio component failure is significant, or when risks from one portfolio component raise the risks in another portfolio component. Risk management identifies and exploits the potential improvements in portfolio component performance that may increase quality, customer satisfaction, service levels, and productivity for both the portfolio components and the organization. Risk management may generate new portfolio components as well.

The objective of portfolio risk management is to accept the right amount of risk commensurate with the anticipated reward to deliver the optimum outcomes for the organization in the short, medium, and longer term. Portfolio risk management differs from project and program risk management in that, in the right circumstances at the portfolio level, the organization may choose to actively embrace appropriate risks in anticipation of high rewards. An example of this would be investing in new, unproven technology with a view of being "first in the market" in anticipation of highly profitable sales. In this case, it is possible that the technology may not work, and the market may not accept the new product; alternatively, the product may be highly successful and profitable.

While a program or a project is concerned, for the most part, with risks and issues that arise inside the specific program or project, portfolios are concerned with (1) maximizing financial value of the portfolio,(2) tailoring the fit of the portfolio to the organizational strategy and objectives, and (3) determining how to balance the programs and projects within the portfolio given the organization's capacities and capabilities. The objectives of Portfolio Risk Management are to increase the probability and impact of positive events and to decrease the probability and impact of events adverse to the value, the strategic fitness of the portfolio, and the balance of the portfolio.

Potential risk conditions include aspects of an organization's environment that may contribute to portfolio risk, such as poor management practices (a negative risk), integrated management systems (positive), an excessive number of concurrent projects (negative), or dependency on external participants who are highly specialized (positive). Because of the downstream impact on programs and projects, risk management becomes critical for root cause correction of negative risks or capitalization of positive risks at the organizational and at the portfolio level. Investment in risks management that addresses root cause correction generally generates the best return. For example, the investment in quality management—a positive risk—has been demonstrated to be more cost effective in comparison to corrective actions required because of poor quality—a negative risk.

Portfolio Risk Management includes providing reserves (or contingencies) across the threat pool within the component programs and projects. The portfolio manager is in a position to hold an aggregate contingency to cover threats where the expected monetary value is an unreliable guide to contingencies due to a less than statistically significant number of risks within an individual initiative—typically threats with high impact and low probability. A portfolio manager may also aggregate risk responses by using some common characteristic; otherwise the nature of a portfolio is a collection of initiatives only coincidentally coupled and not joined by outcome (i.e., impact or consequence of the opportunity). In other words, there isn’t a portfolio risk management element—it is a contingency provision for the constituent projects and programs in cases where each component cannot economically fund protection from threats. This is called equity protection and is commonly used by insurance companies. The opportunity at the equity protection level is the consideration of why an initiative was sanctioned to be in the portfolio in the first place.

While Portfolio Risk Management is embedded in all of the portfolio management processes, there are three key elements in Portfolio Risk Management: risk planning, risk assessment, and risk response. The Portfolio Risk Management processes are:

8.1 Develop Portfolio Risk Management Plan—Planning risk management, including the identification of portfolio risks, portfolio risk owners, risk tolerance, and the creation of risk management processes.

8.2 Manage Portfolio Risks—Executing the portfolio risk responding to, and monitoring risks.

8.1 Develop Portfolio Risk Management Plan

A risk management plan is a component of the project, program, or portfolio management plan that describes how risk management activities Will be structured and performed. lt also includes reference to the corporate risk management guidelines, policies, and procedures that define the organization's risk strategy, tolerance, and thresholds for the organization. The risk management plan provides the approach that Will be used by the governing bodies for assessing risk in proposed new portfolio components.

Different types of new investments Will be considered knowing that generally venture or growth-type investments carry more attraction due to a higher potential return, but they are a higher organizational stretch and, on average, carry higher risk. In order to maximize return on investment of resources, some high-risk investments may be considered, but the risk management plan Will show how the governing bodies should work to balance investment risk and manage the overall expected return against known risks. The result is risk-based decision making.

Inputs

 

.1 Portfolio management plan

.2 Portfolio process assets

.3 Organizational process assets

.4 Enterprise environmental factors

 

Tools & Techniques

 

.1 Weighted ranking and scoring techniques

.2 Graphical analytical methods

.3 Quantitative and qualitative analysis

 

Outputs


.1 Portfolio management plan updates


8.2 Manage Portfolio Risks

Manage Portfolio Risks consists of four stages: (1) risks are identified, (2) risks are analyzed, (3) risk responses are developed, and (4) risks are monitored and controlled throughout the Manage Portfolio Risk process.

Inputs

 

.1 Portfolio

.2 Portfolio management plan

.3 Portfolio reports

.4 Portfolio process assets

.5 Organizational process assets

.6 Enterprise environmental factors

 

Tools & Techniques

 

.1 Weighted ranking and scoring techniques

.2 Quantitative and qualitative analysis

 

Outputs

 

Portfolio management plan updates

Portfolio reports

Portfolio process assets updates

Organizational process assets updates