Lesson 3 Flashcards
_____ involves a multifaceted approach that incorporates various techniques and components
Project Selection in Portfolio Management
_______ ensures that projects are aligned with organizational goals and objectives, while financial analysis evaluates the financial viability and potential returns of projects.
Strategic alignment analysis
_______ helps identify, analyze, and mitigate risks associated with projects, while resource capacity analysis evaluates the organization’s ability to allocate resources effectively.
Risk assessment
________, _______, and ______ provide quantitative frameworks for prioritizing projects and maximizing overall portfolio value. Additionally, components such as project proposals, strategic objectives, selection criteria, resource availability, risk profile, stakeholder input, and portfolio optimization contribute to informed decision-making and successful project selection outcomes.
Benefit Cost Ratio (BCR), scoring models, and opportunity cost analysis
_______ involves ensuring that proposed projects are in line with the organization’s strategic goals and objectives. When projects align with strategic objectives, they contribute to the long-term success and sustainability of the organization.
Strategic alignment analysis
_______ ensures that resources are allocated to initiatives that drive the organization forward rather than detracting from its core mission.
Strategic alignment
Projects are evaluated based on how well they support the organization’s mission, vision, and strategic priorities. This analysis requires a thorough understanding of the organization’s strategic plan and objectives.
Evaluation Criteria
Projects should not only align with current strategic objectives but also contribute to shaping future strategies. They should address emerging market trends, technological advancements, and changing customer needs to maintain the organization’s competitive advantage.
Integration with Strategy
While some projects may focus on immediate needs and objectives, others should have a long-term perspective, contributing to the organization’s sustained growth and relevance in the industry.
Balancing Short-term and Long-term Goals
Stakeholders at all levels of the organization need to be involved in the strategic alignment analysis to ensure broad buy-in and support for selected projects.
Alignment Across Stakeholders
Strategic alignment is not a one-time assessment but an ongoing process. Projects should be regularly reviewed to ensure they continue to align with evolving organizational strategies and priorities.
Continuous Monitoring
This involves evaluating the financial viability and potential returns of proposed
projects.
Financial analysis
______ calculates the present value of future cash flows generated by a project, considering the time value of money. A _____ indicates that the project is expected to generate value for the organization.
Net Present Value (NPV); positive NPV
It represents the discount rate at which the net present value of cash flows from a project equals zero. Projects with higher IRRs are generally more desirable as they offer higher returns relative to the investment.
Internal Rate of Return (IRR)
______ indicates the time it takes for a project to recoup its initial investment. Projects with shorter _____ are preferred as they offer quicker returns on investment.
Payback period
Financial analysis should consider various scenarios and factors that could impact project profitability, such as changes in market conditions, cost overruns, and revenue projections.
Sensitivity Analysis
Financial analysis should account for project risks by incorporating risk-adjusted discount rates or using techniques such as Monte Carlo simulation to assess the range of potential outcomes.
Risk-adjusted Returns
In addition to quantitative financial metrics, qualitative factors should also be considered, such as strategic fit, competitive advantage, and intangible benefits.
Cost-Benefit Analysis
Proposed projects should fit within the organization’s budget constraints and financial capacity. Financial analysis helps prioritize projects based on their potential returns and resource requirements.
Alignment with Budget
_______ involves identifying, analyzing, and mitigating risks associated with proposed projects.
Risk assessment
Risks can arise from various sources, including technical complexity, market volatility, regulatory changes, and resource constraints. A thorough risk identification process ensures that all potential risks are considered.
Identification of Risks
Risks are assessed qualitatively by their impact and likelihood of occurrence and quantitatively by estimating their potential financial and operational impacts on the project.
Qualitative and Quantitative Analysis
Once risks are identified and assessed, appropriate mitigation strategies are developed to reduce their likelihood or impact. This may involve risk avoidance, risk transfer, risk mitigation measures, or acceptance of certain risks.
Risk Mitigation Strategies
_______ are developed to address unforeseen events or risks that may arise during project execution. These plans outline alternative courses of action to minimize disruptions and maintain project progress.
Contingency plans; Contingency Planning
Risk management is an ongoing process that requires continuous ________ throughout the project lifecycle. Risks should be regularly reviewed, and mitigation strategies adjusted as necessary to address changing circumstances.
Monitoring and Control
Effective communication of risks to stakeholders is essential for informed decision-making and proactive risk management. Regular reporting on risk status and mitigation efforts ensures transparency and accountability.
Communication and Reporting
Risk assessment should be integrated into project planning processes, including project scope, schedule, budget, and , resource allocation.
Integration with Project Planning
This ensures that risks are considered at every stage of project development and implementation.
Integration with Project Planning
After project completion, an assessment of risks encountered and mitigation strategies implemented provides valuable insights for future projects.
Lessons Learned
_______ are documented and incorporated into organizational risk management practices.
Lessons learned
________ involves evaluating the organization’s ability to allocate resources to proposed projects.
Resource capacity analysis
Resources required for project execution include financial resources, human resources, equipment, technology, and facilities. A comprehensive
inventory of available resources is conducted to assess capacity.
Resource Identification
Once resource requirements for proposed projects are identified, ________ decisions are made based on availability, priority, and strategic importance. It should be balanced to avoid over-commitment or underutilization of resources.
Resource Allocation
Organizations may face constraints such as limited funding, skilled labor shortages, or competing priorities.
Resource Constraints
_________ helps identify
constraints and prioritize projects accordingly.
Resource capacity analysis; Resource Constraints
_________ aims to optimize resource utilization by aligning resource allocation with project priorities and strategic objectives. This
involves balancing resource demand and supply across the organization.
Resource capacity analysis; Resource Optimization
Resource capacity analysis considers various scenarios and contingencies that may impact resource availability, such as changes in project scope, resource
constraints, or unexpected events.
Scenario Planning
________ helps organizations prepare for different resource allocation scenarios.
Scenario planning
Resource capacity analysis requires collaboration across different departments and stakeholders to ensure that resource allocation decisions are aligned with organizational goals and objectives.
Cross-functional Collaboration
Resource capacity analysis is an iterative process that requires continuous _________ as project priorities, resource availability, and organizational needs evolve over time. Regular reviews ensure that resource allocation remains aligned with strategic objectives
Monitoring and Adjustment
________ compares the total expected benefits of a project to its total expected costs.
Benefit Cost Ratio (BCR)
BCR is calculated by dividing the total benefits of a project by its _______. A BCR greater than 1 indicates that the project’s benefits outweigh its costs, making it financially viable.
total costs; Calculation
BCR analysis should consider both tangible and intangible benefits of a project, such as increased market share, enhanced brand reputation, or improved customer satisfaction. Intangible benefits may be more challenging to quantify but are essential for comprehensive project evaluation.
Consideration of Intangible Benefits
BCR analysis typically discounts future benefits and costs to account for the time value of money. Discounting adjusts future cash flows to their present value, reflecting the opportunity cost of investing capital in the project.
Discounting Future Benefits and Costs
BCR allows for the comparison of different projects based on their cost- effectiveness. Projects with higher BCRs offer greater value relative to their costs
and are generally preferred over projects with lower BCRs.
Comparative Analysis
BCR analysis should consider various scenarios and assumptions to assess the robustness of results. ______ evaluates how changes in key variables, such as project costs, benefits, or discount rates, impact the BCR.
Sensitivity Analysis
BCR analysis should account for project risks by incorporating risk-adjusted discount rates or adjusting benefits and costs to reflect the probability of
occurrence. _______ BCR provides a more accurate assessment of project viability in uncertain environments
Risk-adjusted
BCR analysis should consider the strategic alignment of projects with organizational goals and objectives. Projects with higher BCRs that contribute to strategic priorities are given priority in project selection.
Alignment with Strategic Objectives
BCR analysis should consider the long-term implications of projects, including their sustainability, scalability, and potential for future growth. Projects with positive long-term BCRs create value for the organization over time, contributing to its overall success and competitiveness.
Long-term Perspective
________ involve establishing criteria and assigning weights to different project attributes to prioritize projects.
Scoring models
_______ define criteria based on strategic alignment, financial viability, risk assessment, resource availability, stakeholder impact, and other relevant factors. Each criterion is assigned a weight reflecting its importance in project selection.
Scoring models; Criteria Definition
____ provide an objective framework for evaluating and comparing projects based on predetermined criteria. This reduces subjective biases and ensures consistent decision-making across projects.
Scoring models; Objective Evaluation
Criteria weights are assigned based on their relative importance to the organization’s goals and objectives. Criteria with higher strategic importance or greater impact on project success are assigned higher weights.
Weighting of Criteria
Projects are evaluated against each criterion using a scoring scale, such as numerical scores or qualitative ratings. ________ may vary depending on the nature of criteria and available data.
Scoring Methodology
Scores for individual criteria are aggregated to calculate an overall score for each project. ________ provide a comparative measure of project performance and help prioritize projects based on their overall merit.
Aggregated scores; Aggregation of Scores
_____ assesses the impact of changes in criteria weights or scoring methodologies on project rankings. This helps identify the robustness of results and potential areas for improvement in the scoring model.
Sensitivity analysis
Stakeholders play a crucial role in defining criteria, assigning weights, and evaluating projects using scoring models. Involving key stakeholders ensures that diverse perspectives and priorities are considered in project selection.
Stakeholder Involvement
________ should be periodically reviewed and updated to reflect changes in organizational priorities, market conditions, and project selection criteria. __________ ensures that scoring models remain relevant and effective in guiding project selection decisions.
Scoring models; Continuous Improvement
_______ involves assessing the potential benefits foregone by choosing one project over another or by not pursuing a project at all.
Opportunity cost analysis
____ represents the value of the next best alternative that is sacrificed when a decision is made. In project selection, opportunity cost refers to the benefits that could have been obtained by investing resources in alternative projects or activities.
Opportunity cost; Definition of Opportunity Cost
_______ requires comparing the expected benefits of selected projects with the potential benefits of alternative projects or investment opportunities. This helps identify the most valuable use of resources and maximize overall returns.
Opportunity cost analysis; Comparison of Alternatives
Assessing opportunity costs may involve quantifying the potential benefits of alternative projects or investment opportunities using financial metrics such as NPV, IRR, or BCR. Intangible benefits should also be considered in the analysis.
Quantification of Benefits
Opportunity cost analysis helps decision-makers evaluate trade-offs between different projects or investment options. It highlights the implications of resource allocation decisions on organizational goals and objectives.
Trade-off Analysis
___ should consider the risks associated with alternative projects or
investment opportunities. Projects with higher opportunity costs may offer greater potential returns but also carry higher risks, requiring careful risk assessment and mitigation.
Opportunity cost analysis; Consideration of Risks
_________should consider the strategic alignment of alternative projects with
organizational goals and objectives. Projects that contribute to strategic priorities and long-term sustainability may have lower opportunity costs.
Opportunity cost analysis; Strategic Alignment
________ is dynamic and should be revisited regularly to account for changes in market conditions, resource availability, and organizational priorities. Regular reviews ensure that resource allocation decisions remain aligned with strategic objectives.
Opportunity cost analysis; Dynamic Nature
_______ provides decision-makers with valuable insights into the potential trade-offs and consequences of project selection decisions. It facilitates informed decision-making and helps maximize the value delivered by the portfolio.
Opportunity cost analysis; Decision Support
Transparent communication of opportunity costs to stakeholders is essential for building consensus and support for project selection decisions. Clear articulation of the rationale behind resource allocation decisions enhances trust and accountability within the organization.
Communication and Transparency
__________ is a fundamental tool for evaluating the financial performance and profitability of investments. Considering the investment cost, returns, calculation period, risks, and other factors, organizations can make informed decisions, allocate resources effectively, and drive sustainable growth and profitability.
Return On Investment analysis
This component involves assessing the potential revenue generated by the investment. It includes direct income from sales, services, or other
revenue streams associated with the project.
Financial Returns (Gain)
ROI analysis considers the cost-saving opportunities resulting from the investment. This could include reductions in operational costs,
overhead expenses, or efficiencies gained through process improvements
Cost Savings
The upfront costs associated with implementing the project, including capital expenditures, equipment purchases, software licenses, and
implementation fees.
Investment Costs (Expense)
This component includes recurring costs such as maintenance, operational expenses, employee salaries, and other expenditures required to sustain the investment over time
Ongoing Expenses
Future returns are discounted to their present value to account for the time value of money. This ensures that future cash flows are adjusted for inflation and opportunity costs.
Time Value of Money
ROI analysis considers the _____ over which returns are expected to be realized. Short-term and long-term ROI projections may vary depending on the nature of the investment and its associated payback period.
Timeframe
ROI analysis incorporates ______ to account for uncertainties and potential setbacks associated with the investment. It evaluates the
probability and impact of various risks on the expected returns.
risk assessment
Measures to mitigate risks and uncertainties are considered in ROI analysis. This may include contingency plans, insurance coverage, diversification strategies, or contractual agreements to minimize potential losses.
Risk Mitigation Strategies
______ evaluates the strategic alignment of the investment with organizational goals and objectives. It considers how the investment contributes to the organization’s mission, vision, and long-term strategy.
ROI analysis; Qualitative Factors
Qualitative factors such as market demand, competitive landscape, and industry trends are assessed to gauge the potential for success and market acceptance of the investment.
Market Opportunity
______ considers the impact of the investment on various stakeholders, including employees, customers, suppliers, and communities. It evaluates how the investment aligns with stakeholder interests and expectations.
ROI analysis; Stakeholder Impact
______ is calculated by dividing the total revenue total cost from the investment by the total investment cost and expressing the result as a percentage.
ROI; Calculation Methodology
_____is calculated by subtracting the total investment cost from the total returns generated by the investment.
Net gain
For capital investments such as equipment or infrastructure, depreciation expenses may be factored into the ROI calculation to reflect the reduction in asset value over time.
Consideration of Depreciation
Performance Metrics
ROI analysis may include specific performance metrics and KPIs to track the progress and success of the investment over time. These metrics may vary depending on the nature of the investment and the industry context.
Key Performance Indicators (KPIs)
Performance Metrics
Comparison with industry benchmarks and historical performance data helps assess the relative performance of the investment and identify areas for improvement.
Benchmarking
Decision Criteria
ROI analysis establishes a minimum acceptable ROI threshold that the investment must meet to be considered financially viable. This threshold may vary depending on the organization’s risk tolerance investment objectives, and required rate of return.
Investment Threshold
ROI analysis helps in decision-making by providing a quantitative basis for evaluating investment alternatives. Investments with positive ROIs that exceed the established threshold are generally considered for implementation.
Decision Criteria
ROI analysis provides decision-makers with valuable insights into the potential returns and risks associated with an investment. It helps prioritize projects, allocate resources effectively, and make informed investment decisions.
Decision Support
ROI analysis serves as a performance evaluation tool to assess the success and effectiveness of investments over time. It allows organizations to track ROI metrics, identify areas for improvement, and optimize resource allocation.
Performance Evaluation
ROI analysis facilitates ________ decisions. It helps organizations allocate limited resources to projects with the highest potential for generating returns and maximizing value.
Resource Allocation
ROI analysis incorporates risk assessment to identify potential risks and uncertainties associated with an investment. It enables organizations
to develop risk mitigation strategies, assess the impact of risks on expected returns, and make contingency plans.
Risk Management
ROI analysis supports ________ by aligning investments with organizational goals and objectives. It helps ensure that investments contribute to the organization’s long-term growth, competitive advantage, and sustainability.
strategic planning
