Portfolio management turns investments into capabilities

Organizational capability is directly linked with value and benefits. So, the purpose is to turn investments into value. Once an investment is used to build an organizational capability to deliver a certain service, this ability can be a sustained benefit for all future projects.

 

According to PMI literature [1], Portfolio management practices around portfolio selection and execution, decision making, change management, risk management, value management, and benefit management have a direct impact on resource capacities and capabilities.

The inverse can be true as well. Suppose I am very good in hacking and exploiting the weakness in IT platforms. This is a capability that I possess. If I make a company for the purpose of ethical hacking and informing others about potential flaws of their platform, all my projects selection, stakeholder engagement, risk and value management will be centered around my capability. My aim will be to seek investment from other companies, use my capability to find bugs in their systems and make a living out of it.

 

By finding bugs in newer systems, I will be enhancing my hacking capabilities too. This will allow me to seek more projects and thus more rewards. Thus I will be using the investment to enhance my present capabilities and based on my improved capabilities finding newer investments :)

 Reference:

1. Project Management Institute. 2018. The standard for portfolio Management – Fourth Edition.
2. https://www.inverse.com/article/56350-the-complete-ethical-hacking-certification-course

Perception of risks is the difficult part of risk mangement

The hardest part about risk management is that it is a perception. It is one’s own view of factors that can affect the progress. Since this is a perception or perceived reality, it is different from person to person and thus organization to organization. 

The above picture is from the course material. We can see that risk perception is influenced by factors like experience, knowledge, skill and confidence etc. So, if I am very adept in a certain programming language and I have lots of experience on it, if I were to do risk analysis of a project that is developed with the language I know, I will put the risk factor of delay low. Even though I may not be doing all the work, my personal bias is influencing me to put a low risk factor. Another person who is less expert in that field may put a higher risk that the project will cost more and will be delayed.

Similarly, an experienced project manager will put a low risk factor for cost, delays and resource availability as compared to a new project manager. This doesn’t mean that the experienced manager is right. His over confidence can ruin the whole project later. The point I want to make is that due to experience the risk perception is different, and the risk management work will be different.

Cultural influence cannot be avoided in risk management too. Some companies have a higher risk appetite as compared to others. This too might have been influenced by past experiences if they have gained much by taking risks.

All risks have direct influence on the portfolio management plan. If we are conservative in our approach, we will identify many risks. Each risk will have response plans that will take vital time from the overall time. Furthermore, if the risks are too many, the portfolio manager may even decide against starting a new project. This may be the safe approach but the opportunity for loss will be too high.

Reference:

1. Project Management Institute. 2018. The standard for portfolio Management – Fourth Edition. Page 90