3 Facts You Must Know About Portfolio Management
Some of us out there do not know that there are projects that are bigger than projects. One of such is what we call Portfolio management. In this article, I want to tell you some of the facts that you need to know about it. Follow me as we look at that together in this article.
What then is Portfolio Management?
A Portfolio is defined as projects, programs, subsidiary portfolio and operations that are managed as a group in order to achieve the strategic objectives of an organization. One fact about any portfolio is that it is bigger than programs. It may not also have a common objective like Program Management.
Portfolio Management can also be defined as the centralized management of one or more portfolios to achieve the strategic objectives of the organization. The Programs or projects of the portfolio may not necessarily be interdependent or directly related. Take, for example, we may have Projects that are launched by the Marketing and Sales department of an organization. These projects and programs may not have common objectives but they can be managed together as a portfolio.
Here are the objectives…
#1 Investment decisions
One of the purposes of the portfolio management strategy is that it will always guide investment in the organization. When an organization has it in place, it will be able to decide on which project to invest in. It will help them to see how individual investment in a project will affect the overall objective of a project. This will assist the organization in prioritizing its project funding. Above all. it will help them to achieve the desired result.
#2 Optimal Mix
Having a Program Management structure in place will also allow the organization to have a mix of programs that will be of optimal result to the organization. It is a combination of different programs that are brought together in order to achieve the strategic objectives. They will be able to know which program to give priority to when there is a paucity of funds. This helps them to plan when it becomes difficult to run all the programs at the same time.
It will also guarantee transparency in decision making in the organization. Having this type of management at the central level will allow the organization to carry all stakeholders along before decisions that will affect the entire organization can be made. It also allows tactical management to consider all factors before deciding on the future of individual projects under the portfolio.
Having a good Portfolio Management strategy in place will also allow any organization to prioritize team and physical resource allocation in the organization. If an organization has limited resources to projects that are going on at the same time. Through analysis at the corporate level, they will be able to know which of the projects should they give much attention to.
#5 Increase ROI
Most at times, when an organization has multiple projects or programs running at the same time and they are not well managed, the organization might run into scope creep, a situation where the scope of work keeps expanding without a considerable increase in the cost of the project. In order to maximize ROI on a project. It is better for the organization to manage all the projects in its portfolio from the head office. This will guarantee that the company is able to achieve the desired results.
#6 Managing Aggregate risks
Also, having a good portfolio management strategy in place will allow the organization to manage risks holistically. They will be able to identify all the risks that are likely to jeopardize the entire projects and channel resources towards mitigating those risks. You should know that if such risks are not managed centrally, The organization might end up spending more to reduce the effect of risks on projects.
Also, one of the major reasons for setting up Portfolio Management is to make sure that all projects are managed in line with the organization strategic objectives. In order to get the best out of portfolio management, each component of the portfolio has to be prioritized. With this, it is only those projects that will contribute most to the strategic objective of the organization are executed first.
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