![]() In fact, what will work for one component, may not necessarily work for another. There is no one magic formula that will work for an entire portfolio. If it does, however, then portfolio risk management would prove beneficial.Īt its most basic, project concerns and risks are often specific to a program or project, but portfolios focus on their entirety, taking into account the financial value of a portfolio, alignment of the portfolio to the organizational objectives and strategy, and the balance of the projects and programs within the portfolio.īetween portfolio risk management and project and program risk management, the former is more difficult because of the projects’ inherent inconsistencies. The potential risk, under the circumstances, is the possibility that the technology may not work. ![]() For instance, an organization may invest in new technology that has yet to be tested, in anticipation of high pro table sales. There’s simply no room for project failures in a project-driven organizations.īut portfolio-based organizations actively embrace appropriate risks, knowing that strategic portfolio risk management will yield high rewards. Portfolio risk management accepts the right amount of risk with the anticipation of an equal or higher reward, while project and program risk management focuses on identifying, analyzing and controlling risks and potential threats that can impact a project. In some cases, new portfolio components may be discovered through portfolio risk management. In some instances, one portfolio component risk can potentially increase the risk of another, underlining the importance of portfolio risk management.Īpart from identifying causes of potential failure, risk management also identifies potential portfolio improvements and exploit them to increase quality, service levels, customer satisfaction and productivity. In portfolios, there is usually some interdependencies between high-priority components, portfolio risk management is then crucial, because of the significant impact a component failure will have. The goal is to mitigate activities, events, and circumstances that will have a negative impact on a portfolio, and to capitalize on potential opportunities. To keep risk at a minimum or at a desirable level, portfolio risk management must be a structured assessment and analysis of portfolio risk through risk management. There are many causes behind a portfolio risk, and the impact is not always foreseen as either positive or negative, thus the need for portfolio risk management to eliminate uncertainties as much as possible, and limit the damage so the portfolio won’t be derailed. It could be the weakest or strongest link that went bad at some point. But to have a better understanding of the overall level of risk in a portfolio, and then adjust project risks accordingly.Īny uncertain event or condition that will have either a negative or positive effect on portfolios’ objectives is considered a portfolio risk. ![]() ![]() ![]() Portfolio risk management, however, does not mean avoiding risky projects entirely to ensure success. After all, it only takes one program or project to go wrong for an entire portfolio to fail meeting the organization’s strategic objectives. But when risk management is required at the overall enterprise level or project portfolio management, an organization will need a portfolio risk management strategy. Handling risks at the individual project level is a lot easier, because there are only a few factors involved and need to be controlled. ![]()
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