Portfolio Risk Management Flashcards
1
Q
Develop Portfolio Risk Management Plan Inputs?
A
- Portfolio management plan
- Portfolio process assets
- Organization process assets
- Enterprise environmental factors
2
Q
Develop Portfolio Risk Management Plan T&Ts?
A
- Weighted ranking and scoring techniques
- Graphical analytical methods
- Quantitative and qualitative analysis
3
Q
Develop Portfolio Risk Management Plan Outputs?
A
- Portfolio management plan updates
- Portfolio process assets updates
- Organizational process assets updates
4
Q
Manage Portfolio Risks Inputs?
A
- Portfolio
- Portfolio management plan
- Portfolio reports
- Portfolio process assets
- Organizational process assets
- Enterprise environmental factors
5
Q
Manage Portfolio Risks T&Ts?
A
- Weighted ranking and scoring techniques
- Quantitative and qualitative analysis
6
Q
Manage Portfolio Risks Outputs?
A
- Portfolio management plan updates
- Portfolio reports
- Portfolio process assets updates
- Organizational process assets updates
7
Q
Why is Portfolio Management Plan an Input of Develop Portfolio Risk Management Plan?
A
Because
- It provides guidance regarding governance model, performance management, communication, and stakeholder engagement for developing the risk management plan
- It may define roles and responsibilities for conducting risk management, budgets, risk management activities schedule, risk categories, definition of probability and impact, and stakeholder risk tolerances
8
Q
Why is Portfolio Process Assets an Input of Develop Portfolio Risk Management Plan?
A
Because it provides
- List of portfolio components
- Portfolio component selection criteria
- Prioritization algorithms
- Portfolio risk register
- Portfolio issue register
- Portfolio performance matrices
- Portfolio resources
- Portfolio budget
- Historic files, actual data, lessons learned
9
Q
Why is Organizational Process Assets an Input of Develop Portfolio Risk Management Plan?
A
Because it provides
- Vision and mission statements,
- Organizational strategy and objectives,
- Organizational risk tolerance
- Lessons learned
10
Q
Why is Enterprise Environmental Factors an Input of Develop Portfolio Risk Management Plan?
A
Because
- It can affect the risk management plan: organization culture and structure, infrastructure, OPM, legal and regulatory considerations, industry requirements, and market conditions.
- It may provide relevant information for the risk management plan: commercial databases, academic studies, market research, and benchmarking
11
Q
How is the T&T of Weighted Rankings and Scoring Techniques used in Develop Portfolio Risk Management Plan?
A
- To assess the risks in multiple portfolios and the overall structure of the portfolios
- To identify risks that are critical to the organization’s success
- To help preparing high-level plans for conducting the risk management activities
12
Q
How is the T&T of Graphical Analytical Methods used in Develop Portfolio Risk Management Plan?
A
- To measure risk are defined (probability assessments & impact assessment)
- To visualize and quantify which risks are more critical and require more attention.
13
Q
How is the T&T of Quantitative and Qualitative Analysis used in Develop Portfolio Risk Management Plan?
A
- Analyzing trends
- Balancing the portfolio
- Managing investment choices
14
Q
Why is Portfolio Management Plan Updates an Output of Develop Portfolio Risk Management Plan?
A
Because Portfolio Risk Management Plan is a subsidiary plan of the portfolio management plan
15
Q
Why is Portfolio Process Assets Updates an Output of Develop Portfolio Risk Management Plan?
A
Because it may lead to the update of portfolio process assets, such as portfolio funding
16
Q
Why is Organizational Process Assets Updates an Output of Develop Portfolio Risk Management Plan?
A
Because the portfolio manager may have recommendations for the update of organizational process assets, such as risk checklists, new risk categories, or subcategories
17
Q
Portfolio Risk Management Plan components?
A
- Methodology
- Roles and responsibilities
- Risk measures
- Frequency
- Risk categories
18
Q
Why is Portfolio an Input of Manage Portfolio Risks?
A
- Portfolio risks are identified for each of the authorized portfolio components, as well as for risk events that may affect more than one portfolio components
- Portfolio component dependencies such as logical, logistical, and benefits realization dependencies are also mapped analyzing the portfolio
19
Q
Why is Portfolio Management Plan an Input of Manage Portfolio Risks?
A
Because It provides
- structure and guidance for performing portfolio risk identification, including roles and responsibilities, guidelines on use of tools
- details of the time and budget allocated to portfolio risk management.
20
Q
Why is Portfolio Reports an Input of Manage Portfolio Risks?
A
Because Portfolio reports, in general, and portfolio performance reports, specifically, are important indicators for managing risks (performance of a portfolio may introduce new risks while mitigation of risks could lead to better performance)
21
Q
Why is Portfolio Process Assets an Input of Manage Portfolio Risks?
A
Because
- It include the portfolio-related knowledge bases, such as lessons learned and historical information, which may help in managing risks.
- It provides templates used for risk management
22
Q
Why is Organizational Process Assets an Input of Manage Portfolio Risks?
A
Because they may be used
- vision and mission
- strategy and objectives
- The values
23
Q
Why is Enterprise Environmental Factors an Input of Manage Portfolio Risks?
A
Because they may be useful in identifying risks: commercial databases, academic studies, benchmarking, or other industry studies
24
Q
Portfolio Risk Register components?
A
- List of identified risks
- Risk owner
- List of potential responses
- Probability Impact Assessment
- Risk triggers
- Updated risk categories
25
How is the T&T of Weighted Ranking and Scoring Techniques used in Manage Portfolio Risks?
To evaluate the existing risks and identify whether any new risks have arisen during recurring governance meetings
* meetings dedicated to reviewing risks
* meetings where the review of key risks is an agenda item
26
How are the T&T of Quantitative and Qualitative Analysis used in Manage Portfolio Risks?
- To better understand the interdependencies, importance, timing, and confidence limits
- To determine deviations from the baseline, which may indicate the potential impact of threats or opportunities
- To forecast the degree of success in achieving the portfolio scope
- To evaluate the effectiveness of earlier risk response actions (Trends analysis)
- To help considering risk response strategies for each risk; making decisions to choose the most appropriate response strategy or mix of strategies, developing specific actions to implement those decisions, assessing the potential result of these actions with respect to the success criteria of the portfolio
27
Why is Portfolio Management Plan Updates an Output of Manage Portfolio Risks?
Because the risk response plans are developed and accepted that results in the portfolio budget may have to be increased to cover preventive actions or to allow for contingency reserves, schedule, and resources (the portfolio management plan is updated as response activities are formally approved to ensure that the agreed-upon actions are implemented and monitored)
28
Why is Portfolio Reports an Output of Manage Portfolio Risks?
To help respond to risks, and issues and support decision-making
- Risk reports, including risk responses and analysis
- The top portfolio risks in the risk register (risk component chart - a grouping of risks by category and by component)
- Governance recommendations (include portfolio risk status and responses): new risks, new status, new responses or new actions planned, or recommendations for changes to portfolio components based on risks
- Portfolio issues in the issue register after analysis is completed for those risks that were realized and include the response actions that will be taken
29
Why is Portfolio Process Asset Updates an Output of Manage Portfolio Risks?
Because
- It may need to update the portfolio risk register, the portfolio issues register, and other documents
- The portfolio component lists will need to be updated as Governance recommendations for changes to portfolio components based on risks are accepted
30
Why is Organizational Process Asset Updates an Output of Manage Portfolio Risks?
Because Organizational process assets may be updated: the risk assessment for the organization
31
What is the Goal of Portfolio Risk Management?
- Capitalizing on the potential opportunities
- Mitigating those events, activities, or circumstances which can adversely impact the portfolio
32
What is the Objective of Portfolio Risk Management?
- 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
- 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
33
Focus of Portfolio Risk Management?
- Maximizing the financial value of the portfolio
- Tailoring the fit of the portfolio to the organizational strategy and objectives
- Determining how to balance the programs and projects within the portfolio given the organization’s capacities and capabilities
34
Purpose of Develop Portfolio Risk Management Plan?
* Identification of portfolio risks, portfolio risk owners, risk tolerance
* Creation of risk management processes
35
Purpose of Manage Portfolio Risks?
Executing the portfolio risk management plan
- assessing risks
- responding to risks
- monitoring risks
36
Type of sources that risks arise?
External and Internal
37
Examples of external risk sources?
- competitors, the competitive market, the financial market
- political events, legal requirements, regulatory requirements
- natural events, environmental concerns
- technological advances, and globalization pressures
38
Examples of internal risk sources?
- Bankruptcy, corruption, lack of integrity
- Shifting priorities, funding reallocation, corporate/organizational realignments
- Management decisions,
- Integrated management systems
- Excessive number of concurrent projects
- Dependency on external participants whose training is highly specialized (either a positive or negative risk)
39
Risk identification participants?
* Executive management
* Operations management
* The portfolio manager
* The program & project management team
40
Executive management's perspective of the portfolio’s risk?
* Portfolio value
* Time to market
* Organizational strategy and objectives
* Funding and investment measures
* Customer brand and organization reputation
* Organizational operating model
* Existing products and services
41
Operations management's perspective of the portfolio’s risk
- Issues with product and project development
- Organization products, services
- Processes needed to support change
42
The portfolio manager's perspective of the portfolio’s risk?
* Reporting, data accuracy
* The quality of portfolio data
* Portfolio component risk information availability
* The link between organizational strategy and the portfolio
* Risk concerns of the executive and operations management
43
The program & project management team's perspective of the portfolio’s risk?
The portfolio components’ time, cost, and scope commitments
44
What are Structural risks?
Those risks concerning with an organization’s ability to organize its portfolio mission with the organization’s hierarchical and clustered structures, which define the methods and approaches in which the organization operates and performs its tasks
45
Execution risks?
Those risks concerning with an organization’s ability to coordinate and supervise throughout the accomplishment of its mission, which defines how change is managed in performing the organization’s tasks
46
Risk Management Plan components?
* Methodology
* Roles and responsibilities
* Risk measures (Definition of Risk probabilities and impacts rate)
* Frequency & Risk management activities
* Risk categories
* Reference to the corporate risk management guidelines, policies, and procedures
* Organization’s risk strategy, tolerance, and thresholds
* The approach that will be used by the governing bodies for assessing risk in proposed new portfolio components
* The approach to balance investment risk and manage the overall expected return against known risks
47
Where is Risk Management critical?
* Where interdependencies exist between high-priority portfolio components
* Where the cost of portfolio component failure is significant
* When risks from one portfolio component raise the risks in another portfolio component
48
Purpose of Risks watch list?
To monitor risks with obviously low ratings of probability and impact that are not retained for additional work
49
What are Manage Portfolio Risks stages?
(1) risks are identified
(2) risks are analyzed
(3) risk responses are developed
(4) risks are monitored and controlled
50
Example of Quantitative and Qualitative Analysis T&T used in Manage Portfolio Risks?
* Quantitative analysis (NPV, ENVP, IRR, PBR, ROI)
* Sensitivity analysis
* Modeling and simulation
* Qualitative analysis (risk probability and impact assessment, sensitivity analysis, trend analysis, modeling and simulation, assumptions analysis, influence diagrams, risk-portfolio component chart, weighted ranking and scoring techniques, heat maps, and ranking and scoring of portfolio risks)
* Investment choice analysis
51
What are Risk owner's responsibilities?
- Making decisions to choose the most appropriate response strategy or a mix of strategies
- Developing specific actions to implement those decisions
- Developing contingency plans and identifying the conditions which trigger their execution
- Developing a fallback plan for execution if the selected strategy is not sufficiently effective
52
How does Portfolio Risk Management provide reserves (or contingencies)?
Across the threat pool within the
component programs and projects
53
How can a portfolio manager aggregate risk responses?
By grouping risks that share common characteristics to manage them more efficiently
54
What does it mean that there isn't a portfolio risk management element?
It means that the portfolio-level contingency is essentially a provision for the constituent projects and programs, especially when each component cannot economically fund protection from threats on its own
55
What is "equity protection" in the context of portfolio risk management?
Equity protection refers to maintaining a collective contingency fund for the entire portfolio, similar to how insurance companies provide a safety net
56
What opportunity does the equity protection level provide?
It involves considering why an initiative was sanctioned to be part of the portfolio in the first place, evaluating its strategic value and alignment with portfolio objectives
57
Why does the portfolio manager hold an aggregate contingency reserve
To address high-impact, low-probability risks that are difficult to predict at the individual initiative level.
58
What is the purpose of the portfolio Risk Management Plan
* To describe the approach that will be followed with references to any applicable organizational policies
* To be used to assess new risks in proposed components as well as overall portfolio risk
* To show how the portfolio oversight group will balance investments against expected return for known risks to support risk- based decisions
59
Quantitative and Qualitative Analysis T&Ts in Develop Portfolio Risk Management Plan
* Status and trend analysis
* Rebalancing methods
* Investment choice tools
* Portfolio risk exposure charts
60
How are (Quantitative and Qualitative Analysis) Status and trend analysis used in Develop Portfolio Risk Management Plan?
* To compare current performance data and recent trends
* To compare recent changes in the portfolio
61
How are (Quantitative and Qualitative Analysis) Rebalancing methods used in Develop Portfolio Risk Management Plan?
To reallocate the portfolio in cases where it has deviated away from the strategy or in order to better balance risk
62
How are (Quantitative and Qualitative Analysis) Investment choice tools used in Develop Portfolio Risk Management Plan?
* Trade-off analysis determines the effect of changing one or more factors of the portfolio
* Market-payoff variability focuses on pricing and sales forecasts and depends on a number of marketing factors, whereby the effects of changing one or more of these factors may affect portfolio itself or the portfolio strategy
* Budget variability determines the effect of changing the portfolio
* Performance variability analyzes the performance of the portfolio
* Market requirement variability analyzes changes in market requirements in relation to the portfolio
* Time-to-market variability determines the effects of portfolio velocity
63
How are (Quantitative and Qualitative Analysis) Portfolio risk exposure charts used in Develop Portfolio Risk Management Plan?
* Outcome probability analysis of the portfolio - estimates of potential portfolio outcomes with respect to the success criteria, listing the possible values of the corresponding performance indicators with their associated confidence levels (a cumulative cost distribution) that the portfolio component manager can use to set realistic targets in line with stakeholder risk tolerances
* Probability of achieving portfolio objectives (the cumulative frequency of meeting certain cost objectives)
64
What is (Quantitative and Qualitative Analysis) Investment choice tools [Trade-off analysis] used in Develop Portfolio Risk Management Plan?
* Purpose: To assess how changes in one or more portfolio factors affect the overall portfolio. This involves weighing the benefits and drawbacks of different investment choices.
* Outputs: Identification of the optimal balance between risk and reward, and understanding how adjustments to factors such as cost, time, or resource allocation impact overall performance.
65
What is (Quantitative and Qualitative Analysis) Investment choice tools [Market-Payoff Variability] used in Develop Portfolio Risk Management Plan?
* Purpose: To evaluate how pricing and sales forecasts can fluctuate based on various market conditions. It acknowledges that external marketing factors can influence the expected return on investment.
* Outputs: Insights into potential revenue fluctuations and risks associated with market dynamics.
66
What is (Quantitative and Qualitative Analysis) Investment choice tools [Budget Variability] used in Develop Portfolio Risk Management Plan?
* Purpose: To understand how changes to the budget can impact the portfolio. This analysis focuses on financial constraints and resource allocation.
* Outputs: Identification of potential funding issues or opportunities for reallocating resources.
67
What is (Quantitative and Qualitative Analysis) Investment choice tools [Performance Variability] used in Develop Portfolio Risk Management Plan?
Purpose: To analyze the performance of individual components within the portfolio. This involves measuring outcomes against established benchmarks.
Outputs: Performance reports that highlight which projects are meeting or exceeding expectations and which are underperforming.
68
What is (Quantitative and Qualitative Analysis) Investment choice tools [Market requirement Variability] used in Develop Portfolio Risk Management Plan?
* Purpose: To assess how changes in market needs or demands can affect the portfolio. This includes shifts in customer preferences or competitive pressures.
* Outputs: Evaluations of how well the current portfolio aligns with market requirements and where adjustments may be necessary.
69
What is (Quantitative and Qualitative Analysis) Investment choice tools [Time-to-market Variability] used in Develop Portfolio Risk Management Plan?
* Purpose: To evaluate how changes in the speed at which products or services are delivered can impact the portfolio. This focuses on the efficiency of project execution and responsiveness to market opportunities.
* Outputs: Analysis of project timelines and their effect on competitive advantage and profitability.
70
How are ranking or scoring determined for Weighted Ranking and Scoring Techniques used in Develop Portfolio Risk Management Plan
The ranking or scoring is provided by any group or individual with specialized knowledge or training and is available from many sources
71
Where is Risk Assessment (Probability and Impact) conducted in Develop Portfolio Risk Management Plan?
Risks may be assessed in interviews or meetings with participants who have been selected because of their familiarity with the risk categories being discussed
72
What are recorded when assessing each identified risk in Develop Portfolio Risk Management Plan?
* The level of probability for each risk and its impact on each objective
* Explanatory details, including assumptions that justify the levels assigned
73
What are Key Explanatory details of Risk Assessment in Develop Portfolio Risk Management Plan?
* Importance: defines which types or categories are more important than others.
* Timing: defines when certain risks or types of risks have more impact.
* Interdependencies: deal with the connections between risks and the connections between types of risks.
* Confidence limits: define the assurance levels of the risk and performance measures.
* Prioritize risk lists: defines how risks will be listed and prioritized in a portfolio list
74
Sample of Risk Categories?
* Portfolio component risk
* Organizational risk
* Performance risk
* Resource risk
* Financial/budget risk
* Market risk
* Regulatory risk
* Image and public relations risk
75
What are defined in Portfolio risk management plan's Methodology component?
Approaches, tools, and data sources that may be used to perform risk management on the portfolio
76
What are defined in Portfolio risk management plan's Roles and responsibilities component?
Owners, lead, support, and team members for each type of activity in the risk management plan, and their responsibilities
77
What are defined in Portfolio risk management plan's Risk measures component?
* Risk categories and Criteria for probability and impact
* Structure of probability and impact matrix
* Stakeholders’ risk tolerances and appetite for risk
78
What are defined in Portfolio risk management plan's Frequency component?
* When and how often the risk management process will be performed throughout the portfolio cycle
* Protocols for governance requirements
* Risk management activities to be included
79
What are defined in Portfolio risk management plan's Risk categories component?
A structure that ensures a comprehensive process of systematically identifying risks to a consistent level of detail
80
Components of Risk reponse strategy
* Response strategy selection
* Strategies for both threats and opportunities,
* Scenario analysis
81
(Manage Portfolio Risks) What need to be done after a set of actions, based on the selected strategies, has been defined
The potential result of these actions is assessed with respect to the success criteria of the portfolio
82
(Manage Portfolio Risks) What does the analysis of potential result of risk repsonse actions base on selected strategies entail?
* Repeating the processes for identifying and analyzing the portfolio risks
* Modifying the existing plans, when necessary, in order to ensure that the response actions become an integral part of the portfolio plan
83
How are (Quantitative and Qualitative Analysis) Quantitative analysis used in Manage Portfolio Risks?
To measure financial metrics (NPV, ENPV, PBP, ROI, IRR)
84
How are (Quantitative and Qualitative Analysis) Sensitivity analysis used in Manage Portfolio Risks?
* To examine the extent to which the uncertainty of each element affects the respective objective when all other uncertain elements are held at their baseline values
* To determine which risks have the most potential impact on the portfolio
85
How are (Quantitative and Qualitative Analysis) Modeling and simulation used in Manage Portfolio Risks?
To translate the uncertainties specified at a detailed level of the portfolio into their potential combined impact on portfolio objectives (a frequency distribution for the values of each key parameter (such as total cost or completion date)
86
Examples of (Quantitative and Qualitative Analysis) Qualitative analysis used in Manage Portfolio Risks?
* risk probability and impact assessment
* sensitivity analysis
* trend analysis
* modeling and simulation
* assumptions analysis
* influence diagrams
* risk-portfolio component chart
* weighted ranking and scoring techniques
* heat maps
* ranking and scoring of portfolio risks
87
How are (Quantitative and Qualitative Analysis) Investment choice analysis used in Manage Portfolio Risks?
To indicate gaps in investment within the portfolio as a whole
88
Risk evaluating considerations?
[Portfolio dynamics]
* fiscal constraints
* cost-benefit
* windows of opportunity
* portfolio component constraints
* stakeholder dynamics
89
What is negative risk?
Risks that have an adverse effect on the portfolio, such as poor management practices, overambitious plans, or inadequate resource allocation.
90
What is positive risk?
Opportunities that can enhance portfolio performance, such as adopting new management systems or leveraging specialized external participants.
91
What can a risk component chart (risk report) help?
group risks by category and by component
92
structural risk vs component risk vs overall risk in the light of portfolio risk management
* structural risk: a risk that stems from the organization's structure or approach to portfolio management and affects multiple components
* component risk: if present in serveral components, may indicate a shared underlying cause
* overall risk: a risk that arises from the combined effects of multiple components
93
What is ENPV
ENPV (Estimated Net Present Value) represents a measure of future Net Present Values (NPVs). It's used to acknowledge the inherent uncertainty surrounding future cash flow projections, providing a range of possible NPV outcomes based on different scenarios or assumptions
94
How are high-level plans for conducting the risk management activities defined in Develop Portfolio Risk Management Plan?
* Risk management cost elements and schedule activities are developed for inclusion in the portfolio component’s budget and schedule, respectively.
* Risk contingency reserve application approaches may be established or reviewed.
* Risk management responsibilities are assigned.
* General organizational templates for risk categories and definitions of terms (levels of risk, probability by type of risk, impact by type of objectives) and the probability and impact matrix are tailored
95
After all portfolio performance, risk, and governance information is gathered and reviewed, what does the governance board do?
Assessing the portfolio and consider rebalancing portfolio components, resource requirements, and portfolio budget in order to realign the portfolio risks
96
Which reports are taken in Manage Portfolio Risks?
* status reports
* trend reports
* capacity reports
* resource utilization reports
97
Which reports are updated in
Portfolio risks
