Risk Management

Risk Management Practice determines how risks are managed across the portfolio. This practice does not concern risks of individual projects and programmes, but the aggregate risks of the portfolio as a whole.

This practice is part of the Portfolio Delivery Cycle.

Purpose

Risks are unexpected events that may or may not occur. Risks can happen in projects, programmes and portfolios. Effective management of risks is an important task for the portfolio office.

Implementing

The following activities form the portfolio risk management practice:

• Aligned portfolio and organizational risk management practices: If the organization has risk management policies and practices in place, portfolio management needs to collaborate closely with them to ensure there is no duplication of work and conflicts in processes.
• Managing interdependencies between projects and programmes: Each project or programmes carries own risk. Risk shifting occurs when the action taken to mitigate a risk from one project, has an effect on another project. Portfolio management needs to ensure the effect of risk shifting is reduced. Similar to risks, logical dependencies take place when one project is waiting for the output from another project.
• Maintain financial contingency: Mitigation strategy of a risk heavily depends on the risk, the project and the possible strategies to address it. The organization’s risk appetite is also a factor can affect risk response strategies. Taking all these factors into account, a portfolio office should have its own financial contingency budgets available.
• Including risk management in the prioritization process: Multi-criteria analysis enables us to choose more than one criterion to prioritize projects and programmes. Many organizations would choose financial returns as one of the prioritization criteria. Alongside financial returns, risk can also be considered to understand the risk-management effort that is needed to achieve desired returns.
• Consider the risk to the organization from the portfolio: The organization will have its own risks to manage. Risks generated by the portfolio can have an impact on the organization. How the portfolio risk will impact the organization, should be monitored and managed by the portfolio office.

Keys to Success

The main elements of risk management include managing interdependencies between projects and programmes, maintaining sufficient portfolio-level financial contingency and including risk in the prioritization process, along with returns.

Written by Inham Hassen

This wiki is developed and managed by an accredited trainer, independent of AXELOS. While aligned with their guidelines, it’s not an official resource.