Pmi risk probability impact matrix3/15/2023 ![]() Some examples of internal business risks include: Internal business changes or disruptions can impact project and program delivery. This can cause significant disruption to the current portfolio and requires strong portfolio governance to adapt to external changes. Political environment (change of political party that could influence future business developments)Īny of the above external business risks can prompt a change in business strategy, which can result in certain projects becoming obsolete since they no longer match the business strategy.customer trends such as having needs met through new technology or services) External Business RisksĮxternal business risks are events in the external environment that are outside of the control of the company. Types of Portfolio-Level Risksīefore covering the portfolio risk management process, let’s first look at the common types of portfolio level risks: external business risks, internal business risks, and execution-related risks. These processes should include reviews of project-level risks with negative implications for the portfolio, ensuring that the project manager has a responsible risk mitigation plan.” Organizations that want to improve the delivery success of their projects need to establish portfolio risk management processes. According to Rachel Ciliberti, portfolio risk management “includes processes that identify, analyze, respond to, track, and control any risks that would prevent the portfolio from achieving its business objectives. The Project Management Institute says that portfolio risk “is an uncertain event, set of events or conditions that if they occur, have one or more effects, either positive or negative, on at least one strategic business objective of the portfolio”. This aspect of portfolio risk management largely occurs during the ‘Protect Portfolio Value’ lifecycle phase. The purpose of portfolio risk management is to increase the likelihood of positive events and decrease the likelihood of negative effects impacting the project portfolio. These are risks that jeopardize the successfully completion of strategic goals. The common view of portfolio risk management involves managing specific portfolio-level risks. Portfolio Risk in the Portfolio Lifecycle Managing Portfolio-Level Risks The diagram below shows how portfolio risk management fits within the portfolio lifecycle. We will start with the more traditional view of portfolio risk management and then address how organizations can manage the risk tolerance within their portfolio. Both components help protect portfolio delivery, but in different ways. There are two important components of portfolio risk management: portfolio risk tolerance and the risk management of specific portfolio-level risks. For this article, we will refer to risks as having a potential negative impact on the portfolio, and opportunities as having a potential positive impact to the portfolio. Organizations that ignore portfolio risk management will sub-optimize their project delivery and potentially jeopardize high priority projects. Organizations that proactively manage portfolio risk are better equipped to take on more risk, increase portfolio value, and have a higher rate of successful project delivery. Portfolio risk management is an important success factor in an organization’s ability to deliver more business value. In our overview of project portfolio management, we highlighted that the goal of portfolio management is to maximize business value delivery. The scope of portfolio risk management is far broader than program and project risk management and requires senior leadership involvement. However, unlike project risk management which is focused on events that could impact the project, portfolio risk management is focused on events that could impact the accomplishment of strategic objectives. These steps are similar in procedure with traditional project and program risk management. The common view of portfolio risk management involves processes to identify, assess, measure, and manage risk within the portfolio. This post will provide a complete overview of portfolio risk management. The COVID-19 crisis with its massive impact on companies and industries is a recent example of why it is important for organizations to establish project portfolio risk management processes to safeguard the portfolio and its value. Organizations focused on improving their portfolio management discipline will be in a position to begin portfolio risk management after they have established work intake and prioritization processes. Portfolio risk management enables organizations to protect portfolio investments and balance the level of risk in the portfolio.
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