Portfolio Risk Management Process - Revision history

Tkokotas at 15:20, 16 November 2018

2018-11-16T15:20:46Z

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			''Developed by Jens Møller''


	= Abstract =		= Abstract =

JensMoller at 18:26, 28 February 2018

2018-02-28T18:26:15Z

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JensMoller at 15:18, 28 February 2018

2018-02-28T15:18:57Z

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	The process of the four aspects should be handled iteratively, so all the aspects are applicable at all times. The first iterative process is from the response phase to the analyze phase. The reason for this is, that the impact of the developed responses have to be analyzed again, to make sure that they work as anticipated in relation to the entire portfolio. Another type of iterative process is occurring, when the conditions of a curtain risk changes and it must go through all the phases again. When new risks occurs all the phases need to be used as described.		The process of the four aspects should be handled iteratively, so all the aspects are applicable at all times. The first iterative process is from the response phase to the analyze phase. The reason for this is, that the impact of the developed responses have to be analyzed again, to make sure that they work as anticipated in relation to the entire portfolio. Another type of iterative process is occurring, when the conditions of a curtain risk changes and it must go through all the phases again. When new risks occurs all the phases need to be used as described.


	[[File:Identification.PNG\|center\|1000px\|Ideation tools application]]		[[File:Identification.PNG\|center\|1000px\|Ideation tools application]]


	= Identification of the portfolio risks =		= Identification of the portfolio risks =
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	The last type of tool is the ''Diagramming Techniques''. It is basically visualizations of causality in relation to possible risks and portfolio objectives e.g. cause-and-effect diagrams, system or process flow charts and influence diagrams. The tools can also help categorize the risks e.g. Risk Component Chart amongst others.		The last type of tool is the ''Diagramming Techniques''. It is basically visualizations of causality in relation to possible risks and portfolio objectives e.g. cause-and-effect diagrams, system or process flow charts and influence diagrams. The tools can also help categorize the risks e.g. Risk Component Chart amongst others.


	==Outputs==		==Outputs==
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	==Tools and techniques==		==Tools and techniques==

	The tools used for the analysis is normally divided in two categories. The ''Risk Probability and Impact Assessment'' and ''the Risk Combining and Modeling Techniques''<ref name="SPM" />. Risk Probability and Impact Assessment investigates the probability of a certain risk of happening and the actual impact if it happens. It is very important to keep the quality of the input in mind during this process. The risks should be formulated in measurable variables and parameters in order to calculate the impact and probability as objectively as possible. The probability is normally visualized in distributions e.g. normal distribution.		The tools used for the analysis is normally divided in two categories. The ''Risk Probability and Impact Assessment'' and ''the Risk Combining and Modeling Techniques''<ref name="SPM" />. Risk Probability and Impact Assessment investigates the probability of a certain risk of happening and the actual impact if it happens. It is very important to keep the quality of the input in mind during this process. The risks should be formulated in measurable variables and parameters in order to calculate the impact and probability as objectively as possible. The probability is normally visualized in distributions e.g. normal distribution.

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	==Output==		==Output==

	The output of the ''Analyze Portfolio Risks'' updates the ''Portfolio Risk Register'' and implements ''Portfolio Risk Exposure charts''. The update consists of a ranking of the list of portfolio risks. The priority can be divided into different objectives and give the portfolio manager a better overview on the objectives. The risk breakdown structure should be categorized into either root causes or portfolio objectives by now. Some immediate responses can be a part of the output, but focus should be on the risks impacting in the near future. The risks that is not prioritized should be formulated on a watch-list for monitoring. Since the processes is iterative, some of the risks will occur in the analysis more than once. Therefor information about overall trends should be gathered to control if the anticipated affect isn't accordingly.		The output of the ''Analyze Portfolio Risks'' updates the ''Portfolio Risk Register'' and implements ''Portfolio Risk Exposure charts''. The update consists of a ranking of the list of portfolio risks. The priority can be divided into different objectives and give the portfolio manager a better overview on the objectives. The risk breakdown structure should be categorized into either root causes or portfolio objectives by now. Some immediate responses can be a part of the output, but focus should be on the risks impacting in the near future. The risks that is not prioritized should be formulated on a watch-list for monitoring. Since the processes is iterative, some of the risks will occur in the analysis more than once. Therefor information about overall trends should be gathered to control if the anticipated affect isn't accordingly.

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	The ''scenario analysis'' can also be used, as earlier mentioned. It is basically several responses based on different outcomes. In order to find appropriate causality related to responses and risks the previous steps, identification and analysis, might be necessary.		The ''scenario analysis'' can also be used, as earlier mentioned. It is basically several responses based on different outcomes. In order to find appropriate causality related to responses and risks the previous steps, identification and analysis, might be necessary.


	==Output==		==Output==
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	= Limitations =		= Limitations =

	Portfolio Risk Management is obviously not the whole truth. It tries to predict how the risks evolve. The methods in the described process and the process itself has some limitations. Some of the is stated below:		Portfolio Risk Management is obviously not the whole truth. It tries to predict how the risks evolve. The methods in the described process and the process itself has some limitations. Some of the is stated below:

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	*In a rapidly changing world where the risk environment changes all the time, the risk manager should ask himself, if he can make his forecasts before the environment changes again.		*In a rapidly changing world where the risk environment changes all the time, the risk manager should ask himself, if he can make his forecasts before the environment changes again.


	= Annotated bibliography =		= Annotated bibliography =

JensMoller at 15:16, 28 February 2018

2018-02-28T15:16:33Z

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	The output consists of the ''Portfolio Change Requests'', ''Portfolio Risk Register'' and ''Organizational Process Assets''. An integration of responses in the ''Portfolio Management Plan'' is done in the ''Portfolio Change Requests'' together with the chosen way of monitoring.		The output consists of the ''Portfolio Change Requests'', ''Portfolio Risk Register'' and ''Organizational Process Assets''. An integration of responses in the ''Portfolio Management Plan'' is done in the ''Portfolio Change Requests'' together with the chosen way of monitoring.

	The new elements in the ''Portfolio Risk Register'' is the outcomes from the ''Portfolio Risk Reassessment'', including an update of the described elements. The Risk Register also contains documentation of the actual risk evolvement and the efficiency of the responses for future use.		The new elements in the ''Portfolio Risk Register'' is the outcomes from the ''Portfolio Risk Reassessment'', including an update of the described elements in "Tools and techniques". The Risk Register also contains documentation of the actual risk evolvement and the efficiency of the responses for future use.

	The last element of the output is the ''Organizational Assets''~~. The~~ four phases ~~should~~ contribute with some ~~organizational~~ changes in the processes, if it is needed<ref name="SPM" />.		The last element of the output is the ''Organizational Assets'', which states that the four phases of ''Portfolio Risk Management'' might contribute with some changes in the organizational processes, if it is needed.<ref name="SPM" />.

	=Conclusion=		=Conclusion=

	~~The four phases that is described above shows an overview of the phases and their content.~~ This Guide should provide the framework for Portfolio Risk Management. When the guide has been followed and reflections has been made regarding appropriate tools and techniques, the Portfolio Risk Management Processes should provide good management guidance in relation to ~~risk susceptibility by using~~ structured ~~and effective responses~~. The organization is also provided with the opportunity to optimize the processes in the organization in terms of risk control.		This Guide should provide the framework for Portfolio Risk Management. When the guide has been followed and reflections has been made regarding appropriate tools and techniques, the ''Portfolio Risk Management Processes'' should provide good management guidance in relation to risks and uncertainty. It is important to use this guide in an structured way, in order to make it efficient. The organization is also provided with the opportunity to optimize the processes in the organization in terms of risk control.

	= Limitations =		= Limitations =
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	*It is not always worth using time and money on the risk manager, if the risks are to insignificant or simply cannot be implemented.		*It is not always worth using time and money on the risk manager, if the risks are to insignificant or simply cannot be implemented.

	*The assumption that human behavior can be predicted can also be challenged. Humans ~~has~~ always evolved and their behavior is to some extent unique.		*The assumption that human behavior can be predicted can also be challenged. Humans have always evolved and their behavior are to some extent unique.

	*Mega-trends can be extremely difficult to forecast and the investigation is to some extent depended on the mega-trend assumptions.		*Mega-trends can be extremely difficult to forecast and the investigation is to some extent depended on the mega-trend assumptions.
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	= Annotated bibliography =		= Annotated bibliography =

	'''The Standard for Portfolio Management, Second Edition, Project Management Institute, 2008''' is one of the standards in the field of Portfolio management, ~~hence he~~ credibility is very high. It focuses more on the Risk Management than other standards, but has the same framework regarding the processes as most ~~standard~~, just more detailed. It gives a good overview of all the portfolio management aspects.		'''The Standard for Portfolio Management, Second Edition, Project Management Institute, 2008''' is one of the standards in the field of Portfolio management, thus the credibility is very high. It focuses more on the Risk Management than other standards, but has the same framework regarding the processes as most standards, just more detailed. It gives a good overview of all the portfolio management aspects.

	'''A Guide to the Project Management Body of Knowledge (PMBOK® Guide), Fifth Edition, Project Management Institute, 2013''' is one of the most well-known standards in the field of project management, ~~hence~~ it also ~~has~~ great credibility. It is great for getting to know, what the components in the portfolio consists of.		'''A Guide to the Project Management Body of Knowledge (PMBOK® Guide), Fifth Edition, Project Management Institute, 2013''' is one of the most well-known standards in the field of project management, thus it has also a great credibility. It is great for getting to know, what the components in the portfolio consists of.

	'''Management of Portfolios, Office Of Government Commerce, TSO, 2011''' Gives a broader perspective to the duties of the portfolio manager. It is also a very well-known and the credibility is high as well. It is on the other hand not very good for Portfolio Risk Management.		'''Management of Portfolios, Office Of Government Commerce, TSO, 2011''' Gives a broader perspective to the duties of the portfolio manager. It is also a very well-known and the credibility is high as well. It is on the other hand not very good for Portfolio Risk Management.

	= References =		= References =

JensMoller at 09:25, 28 February 2018

2018-02-28T09:25:06Z

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	= Monitoring and controlling Portfolio risks =		= Monitoring and controlling Portfolio risks =

	In this phase the portfolio manager controls the risks by using the previous defined responses. The ~~risk owner has also been defined in this phase. This is done by~~ the ~~following actions~~, that is defined in “The Standard for Portfolio Management”~~. The following elements should be monitored~~<ref name="SPM" />:		In this phase the portfolio manager controls the risks by using the previous defined risk owners and responses . The manager that monitors and controls should focus on the below mentioned elements, that is defined in “The Standard for Portfolio Management”: <ref name="SPM" />:
	* Risks		* Risks
	* Trigger conditions		* Trigger conditions
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	* Efficiency of the risk responses		* Efficiency of the risk responses

	~~The monitoring~~ phase contains ~~also~~ the identification of emerging risks. The portfolio manager should also analyze and develop responses to both emerging and existing risks. The existing risks are included because the environment of the risks ~~changes during~~ time. The portfolios attitude towards susceptibility or strategy might change as well.		Beside the elements above the monitor phase contains the identification of emerging risks. The portfolio manager should also analyze and develop responses to both emerging and existing risks. The existing risks are included because the environment of the risks change throughout time. The portfolios attitude towards susceptibility or strategy might change as well.


	==Input==		==Input==

JensMoller at 09:10, 28 February 2018

2018-02-28T09:10:54Z

JensMoller at 08:21, 28 February 2018

2018-02-28T08:21:41Z

JensMoller at 08:03, 28 February 2018

2018-02-28T08:03:15Z

JensMoller at 07:23, 28 February 2018

2018-02-28T07:23:46Z

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	= Abstract =		= Abstract =

	The portfolio manager has to handle several disciplines, where Portfolio Risk Management is one of them<ref name="MP" />. Risks are uncertain ~~and needs to be dealt with when managing portfolios~~. The uncertainties need to be handled to make a solid strategy with as few surprises as possible. This area of portfolio management is critical for success. It is necessary to work through four aspects of ''Portfolio Risk Management'' to control the risks a portfolio is affected by. The various aspects are identification, analysis, development responses and monitoring and control. Hence this article will provide a guidance to structure the framework of the processes and the content in the aspects.		The portfolio manager has to handle several disciplines, where Portfolio Risk Management is one of them<ref name="MP" />. Risks are uncertain. The uncertainties need to be handled to make a solid strategy with as few surprises as possible. This area of portfolio management is critical for success. It is necessary to work through four aspects of ''Portfolio Risk Management'' to control the risks a portfolio is affected by. The various aspects are identification, analysis, development responses and monitoring and control. Hence this article will provide a guidance to structure the framework of the processes and the content in the aspects.

	[[File:Iterative processes.PNG\|center\|1000px\|Ideation tools application]]		[[File:Iterative processes.PNG\|center\|1000px\|Ideation tools application]]
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	The first aspect is identification. In the identification phase all the types of risks regarding portfolio management will be found. When the risks have been found, they will be analyzed. A plan of responses will be developed based on the analysis. The plan consists of concrete actions, when to execute the actions and who that has the responsibility to act, when the situation occurs. When the plan has been set, the assigned manager will monitor the risks and their environment. The portfolio manager will act if needed. The assigned manager keeps a record of new findings and new experiences.		The first aspect is identification. In the identification phase all the types of risks regarding portfolio management will be found. When the risks have been found, they will be analyzed. A plan of responses will be developed based on the analysis. The plan consists of concrete actions, when to execute the actions and who that has the responsibility to act, when the situation occurs. When the plan has been set, the assigned manager will monitor the risks and their environment. The portfolio manager will act if needed. The assigned manager keeps a record of new findings and new experiences.

	The process of the four aspects should be handled iteratively, so all the aspects are applicable at all times. The first ~~one~~ is from the response phase to the analyze phase. The reason for this is, that the impact of the developed responses have to be analyzed again, to make sure that they work as anticipated in relation to the entire portfolio. Another type of iterative process is occurring, when the conditions of a curtain risk changes and it must go through all the phases again.		The process of the four aspects should be handled iteratively, so all the aspects are applicable at all times. The first iterative process is from the response phase to the analyze phase. The reason for this is, that the impact of the developed responses have to be analyzed again, to make sure that they work as anticipated in relation to the entire portfolio. Another type of iterative process is occurring, when the conditions of a curtain risk changes and it must go through all the phases again. When new risks occurs all the phases need to be used as described.


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	= Identification of the portfolio risks =		= Identification of the portfolio risks =

	It is important to realize, that there are 3 types of risks to identify in portfolio risk management<ref name="SPM" />. The types of risks are ''structural risks'', ''component risks'' and ''overall risks''. The ''structural risks'' are the ones related to the interactions between the components. The components consist of either projects or programs. The structural risks are normally threats in form of resource issues but can also be opportunities in form of niche qualification in the organization.		It is important to realize, that there are 3 types of risks to identify in portfolio risk management<ref name="SPM" />. The types of risks are ''structural risks'', ''component risks'' and ''overall risks''. The ''structural risks'' are the ones related to the interactions between the components. The components consist of either projects or programs. The structural risks are normally threats in form of resource issues, but can also be opportunities in form of niche qualification in the organization.

	''Component Risks'' are normally handled by either the project<ref name="Body" /> or program manager, but the component risks get relevant for the portfolio manager, when the risks escalate and expand out of the mandate, that the component manager has. The reason for this is, that the magnitude of these risks might have significant effect on the portfolio or has a strategic aspect. These kinds of risks are normally related to the three parameters of the Iron Triangle, cost, time and scope.		''Component Risks'' are normally handled by either the project<ref name="Body" /> or program manager, but the component risks get relevant for the portfolio manager, when the risks escalate and expand out of the mandate, that the component manager has. The reason for this is, that the magnitude of these risks might have significant effect on the portfolio or has a strategic aspect. These kinds of risks are normally related to the three parameters of the Iron Triangle, cost, time and scope.

JensMoller at 07:02, 28 February 2018

2018-02-28T07:02:28Z

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	= Abstract =		= Abstract =

	~~Risks are a big uncertainty~~, ~~when managing portfolios~~<ref name="MP" />. The uncertainties need to be handled to make a solid strategy with as few surprises as possible. This area of portfolio management is critical for success. It is necessary to work through four aspects of ''Portfolio Risk Management'' to control the risks a portfolio is affected by. The various aspects are identification, analysis, development responses and monitoring and control. Hence this article will provide a guidance to structure the framework of the processes and the content in the aspects.		The portfolio manager has to handle several disciplines, where Portfolio Risk Management is one of them<ref name="MP" />. Risks are uncertain and needs to be dealt with when managing portfolios. The uncertainties need to be handled to make a solid strategy with as few surprises as possible. This area of portfolio management is critical for success. It is necessary to work through four aspects of ''Portfolio Risk Management'' to control the risks a portfolio is affected by. The various aspects are identification, analysis, development responses and monitoring and control. Hence this article will provide a guidance to structure the framework of the processes and the content in the aspects.

	[[File:Iterative processes.PNG\|center\|1000px\|Ideation tools application]]		[[File:Iterative processes.PNG\|center\|1000px\|Ideation tools application]]

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	''Component Risks'' are normally handled by either the project<ref name="Body" /> or program manager, but the component risks get relevant for the portfolio manager, when the risks escalate and expand out of the mandate, that the component manager has. The reason for this is, that the magnitude of these risks might have significant effect on the portfolio or has a strategic aspect or objective. These kinds of risks are normally related to the three parameters of the Iron Triangle, cost, time and scope.		''Component Risks'' are normally handled by either the project<ref name="Body" /> or program manager, but the component risks get relevant for the portfolio manager, when the risks escalate and expand out of the mandate, that the component manager has. The reason for this is, that the magnitude of these risks might have significant effect on the portfolio or has a strategic aspect or objective. These kinds of risks are normally related to the three parameters of the Iron Triangle, cost, time and scope.

	The last type of risks are the ''overall risks''. The overall risks are the risks that emerges, when components interact in the portfolio. The overall risks i.e. all risks that is not defined in the above-mentioned types of risks. The different components can have different objectives, missions or visions, and ~~therefore~~ the components work in different directions. The overall risks can also give the opportunity of distributing "best practice" to other components.		The last type of risks are the ''overall risks''. The overall risks are the risks that emerges, when components interact in the portfolio. The overall risks i.e. all risks that is not defined in the above-mentioned types of risks. The different components can have different objectives, missions or visions, and therefor the components work in different directions. The overall risks can also give the opportunity of distributing "best practice" to other components.

	[[File:Knowledge sharing.PNG\|thumb\|Illustartes knowledge shared between components <ref name= SPM/>]]		[[File:Knowledge sharing.PNG\|thumb\|Illustartes knowledge shared between components <ref name= SPM/>]]
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	==Output==		==Output==
	The output of the ''Analyze Portfolio Risks'' updates the ''Portfolio Risk Register'' and implements ''Portfolio Risk Exposure charts''. The update consists of a ranking of the list of portfolio risks. The priority can be divided into different objectives and give the portfolio manager a better overview on the objectives. The risk breakdown structure should be categorized into either root causes or portfolio objectives by now. Some immediate responses can be a part of the output, but focus should ~~but~~ on the risks impacting in the near future. The risks that is not prioritized should be formulated on a watch-list for monitoring. Since the processes is iterative, some of the risks will occur in the analysis more than once. Therefor information about overall trends should be gathered to control if the anticipated affect is accordingly.		The output of the ''Analyze Portfolio Risks'' updates the ''Portfolio Risk Register'' and implements ''Portfolio Risk Exposure charts''. The update consists of a ranking of the list of portfolio risks. The priority can be divided into different objectives and give the portfolio manager a better overview on the objectives. The risk breakdown structure should be categorized into either root causes or portfolio objectives by now. Some immediate responses can be a part of the output, but focus should be on the risks impacting in the near future. The risks that is not prioritized should be formulated on a watch-list for monitoring. Since the processes is iterative, some of the risks will occur in the analysis more than once. Therefor information about overall trends should be gathered to control if the anticipated affect isn't accordingly.

	''Portfolio Risk Exposure Charts'' illustrates the probability of the portfolio reaching either tangible or nontangible objectives, even though risks mainly are formulated measurably. The cumulative distribution can for instants show the probability of a certain magnitude.		''Portfolio Risk Exposure Charts'' illustrates the probability of the portfolio reaching either tangible or nontangible objectives, even though risks mainly are formulated measurably. The cumulative distribution can for instants show the probability of a certain magnitude.
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	==Input==		==Input==

	The input of the response development phase is updated ''Portfolio Management Plan'' and ''Portfolio Risk Register ([[Risk register ]])''. ''A List of Prioritized components'' within Each strategic category is needed for this phase also<ref name="SPM" />.		The input of the response development phase is the updated ''Portfolio Management Plan'' and ''Portfolio Risk Register ([[Risk register ]])''. ''A List of Prioritized components'' within Each strategic category is needed for this phase also<ref name="SPM" />.

	==Tools and techniques==		==Tools and techniques==
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	[[File:Response strategies.PNG\|center\|1000px\|Ideation tools application]]		[[File:Response strategies.PNG\|center\|1000px\|Ideation tools application]]

	The response strategy can be handled in a lot of ways. In order to structure the approach, the responses can be divided into risks in form of threats, opportunities or both. The threats can be handled in three ways. The manager can either try to avoid, transfer or mitigate the threat. In order to avoid the threats, the portfolio management has to be changed. It can be done by choosing another approach for the same objectives, so the portfolio avoids the threat or completely change the objectives of the portfolio, because the objective is not worth the threat.		The response strategy can be handled in a lot of ways. In order to structure the approach, the responses can be divided into risks in form of threats, opportunities or both. The threats can be handled in three ways. The manager can either try to ''avoid'', ''transfer'' or ''mitigate'' the threat. In order to avoid the threats, the portfolio management has to be changed. It can be done by choosing another approach for the same objectives, so the portfolio avoids the threat or completely change the objectives of the portfolio, because the objective is not worth the dealing with the threat.

	Another strategy is ''transferring'' the potential threat. It can be done by transferring responsibility of the threatening part of the portfolio. It is mainly used transferring the financial exposure e.g. insurance, guaranties, performance bonds etc. The transfer is normally dictated by law or contracts.		Another strategy is ''transferring'' the potential threat. It can be done by transferring responsibility of the threatening part of the portfolio. It is mainly used for transferring the financial exposure e.g. insurance, guaranties, performance bonds etc. The transfer is normally dictated by law or contracts.

	The third way of dealing with ~~risks~~ is to ''mitigate''. When mitigating the threat reduces in probability, impact or both to the acceptable level. It can be done by splitting the risk or taking early action.		The third way of dealing with threats is to ''mitigate''. When mitigating the threat reduces in probability, impact or both to the acceptable level. It can be done by splitting the risk or taking early action.

	Risks are as earlier mentioned also opportunities. They ~~also~~ need to be handled in order to optimize the opportunity exposure in the portfolio. The three opportunity strategies are ''exploit, share'' and ''enhance''.		Risks are as earlier mentioned also opportunities. They need to be handled in order to optimize the opportunity exposure in the portfolio. The three opportunity related strategies are ''exploit, share'' and ''enhance''.

	When ''exploiting'' the opportunity, the manager ~~tries~~ to ~~make sure gaining~~ from the opportunity. This can be done by ~~e.g.~~ allocating more resources in terms of working hours or material. It can also be done by hiring new employees with new or better competences.		When ''exploiting'' the opportunity, the manager makes sure to gain from the opportunity. This can be done by allocating more resources in terms of e.g. working hours or material. It can also be done by hiring new employees with new or better competences.

	If it’s not possible to ''exploit'' the opportunity, ''sharing'' can be the way to go. When sharing the opportunity another party is broad in. The other party gets a part of the gain in return of raising the magnitude or chances of realizing the opportunity. This can be done by establishing partnerships e.g. joint venture, special-purpose companies etc.		If it’s not possible to ''exploit'' the opportunity, ''sharing'' can be the way to go. When sharing the opportunity another party is broad in. The other party gets a part of the gain in return of raising the magnitude or chances of realizing the opportunity. This can be done by establishing partnerships e.g. joint venture, special-purpose companies etc.
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	''Contingent Response Strategy'' is another type of strategy to handle both threats and opportunities. The predefined response is used if certain trigger conditions occurs. This strategy can be used if the trigger conditions has clear warnings in time to incorporate the planned response.		''Contingent Response Strategy'' is another type of strategy to handle both threats and opportunities. The predefined response is used if certain trigger conditions occurs. This strategy can be used if the trigger conditions has clear warnings in time to incorporate the planned response.

	The ''scenario analysis'' can also be used, as earlier mentioned. It is basically several responses based on different outcomes. In order to find appropriate causality of responses and risks the previous steps, identification and analysis might be necessary.		The ''scenario analysis'' can also be used, as earlier mentioned. It is basically several responses based on different outcomes. In order to find appropriate causality related to responses and risks the previous steps, identification and analysis, might be necessary.


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	* Response strategies and actions related to the strategy.		* Response strategies and actions related to the strategy.
	* Trigger plans and related conditions and ~~warning~~.		* Trigger plans and related conditions and warnings.
	* Allocated budget and time for risks in project<ref name="Body" />, program and portfolio level.		* Allocated budget and time for risks in project<ref name="Body" />, program and portfolio level.
	* Fallback plan if the planned responses doesn’t have the estimated and wanted effect.		* Fallback plan if the planned responses doesn’t have the estimated and wanted effect.
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	* Expected risks after responses has been executed, consisting of primordial accepted risks and new accepted risks.		* Expected risks after responses has been executed, consisting of primordial accepted risks and new accepted risks.

	The updated ~~the~~ ''Portfolio Components'' includes reevaluated and rearranged components in the categories. The portfolio component might also need to be re-balanced in order to keep the susceptibility of the portfolio. ''The Portfolio Management Plan'' is also updated in terms of contingency reserves, schedule and resources to an extent, so the portfolio manager can monitor the risks and its environment and know how to respond when trigger conditions happen<ref name="SPM" />.		The updated ''Portfolio Components'' includes reevaluated and rearranged components in the categories. The portfolio component might also need to be re-balanced in order to keep the susceptibility of the portfolio. ''The Portfolio Management Plan'' is also updated in terms of contingency reserves, schedule and resources to an extent, so the portfolio manager can monitor the risks and its environment and know how to respond when trigger conditions happen<ref name="SPM" />.

	[[File:Monitoring.PNG\|center\|1000px\|Ideation tools application]]		[[File:Monitoring.PNG\|center\|1000px\|Ideation tools application]]

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	==Input==		==Input==

	The input~~<ref name="Rolf" />~~ for the ''Analyze Portfolio Risks'' phase is the output of the ''Identification phase''~~. The input of the Analyze Portfolio Risks is as mentioned above the output of the Identify Portfolio Risks~~. It consists of the Portfolio Risk Register and the Risk Management Plan<ref name="SPM" />. The risks found in the identification phase will be analyzed. The risks will be prioritized based on the impact and the probability. The impact can have different parameters e.g. financial, environmental, strategic et cetera. The tolerance of the risks will also be a part of the analysis. The time gives an extra dimension to the analysis in terms of immediate responses to the risks. If the information is subject to bias or in other ways not comprehensive the acting manager should gather the missing information. The analysis must be checked routinely to make sure, that the assumptions hasn’t changed, and if so a new analysis should be made.		The input for the ''Analyze Portfolio Risks'' phase is the output of the ''Identification phase''. It consists of the Portfolio Risk Register and the Risk Management Plan<ref name="SPM" /> <ref name="Rolf" />. The risks found in the identification phase will be analyzed. The risks will be prioritized based on the impact and the probability. The impact can have different parameters e.g. financial, environmental, strategic et cetera. The tolerance of the risks will also be a part of the analysis. The time gives an extra dimension to the analysis in terms of immediate responses to the risks. If the information is subject to bias or in other ways not comprehensive the acting manager should gather the missing information. The analysis must be checked routinely to make sure, that the assumptions hasn’t changed, and if so a new analysis should be made.

	==Tools and techniques==		==Tools and techniques==
	The tools used for the analysis is normally divided in two categories. The ''Risk Probability and Impact Assessment'' and ''the Risk Combining and Modeling Techniques''<ref name="SPM" />. Risk Probability and Impact Assessment investigates the probability of a certain risk of happening and the actual impact if it happens. It is very important to keep the quality of the input in mind during this process. The risks should be formulated in measurable variables and parameters in order to calculate the probability as objectively as possible~~. The bigger the amount of data is the better~~. The probability is normally visualized in distributions e.g. normal distribution.		The tools used for the analysis is normally divided in two categories. The ''Risk Probability and Impact Assessment'' and ''the Risk Combining and Modeling Techniques''<ref name="SPM" />. Risk Probability and Impact Assessment investigates the probability of a certain risk of happening and the actual impact if it happens. It is very important to keep the quality of the input in mind during this process. The risks should be formulated in measurable variables and parameters in order to calculate the impact and probability as objectively as possible. The probability is normally visualized in distributions e.g. normal distribution.

	[[File:Probability & Impact Matrix.PNG\|thumb\|Probability & Impact Matrix (''adopted from The Standard for Portfolio Management'') <ref name= SPM/>]]		[[File:Probability & Impact Matrix.PNG\|thumb\|Probability & Impact Matrix (''adopted from The Standard for Portfolio Management'') <ref name= SPM/>]]
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	The impact and probability is typically investigated by experts in the ''interviews'' or ''Delphi technique''. The impact and probability is not worth much without each other. Hence the two are often combined in the analysis with tools like ''Probability and Impact Matrix <ref name="Geraldi" /> ([[Risk matrix]])'' or ''financial tools ([[Best Practices for Project Portfolio Selection]])'', that can be combined with [[Scenario Analysis]].		The impact and probability is typically investigated by experts in the ''interviews'' or ''Delphi technique''. The impact and probability is not worth much without each other. Hence the two are often combined in the analysis with tools like ''Probability and Impact Matrix <ref name="Geraldi" /> ([[Risk matrix]])'' or ''financial tools ([[Best Practices for Project Portfolio Selection]])'', that can be combined with [[Scenario Analysis]].

	The ''Risk Combining and Modelling Techniques'' analyzes the components both in terms of structure and composition. The analysis reaches beyond the accumulated risks of the components, that escalates in magnitude into the portfolio level. It also investigates the risks that exists because of the interaction of the components. It is typically done by using ''sensitivity analysis and modelling and simulation''.		The ''Risk Combining and Modelling Techniques'' analyzes the components both in terms of structure and composition. The analysis reaches beyond the accumulated risks of the components, that escalates in magnitude into the portfolio level. It also investigates the risks that exists because of the interaction of the components. It is typically done by using ''sensitivity analysis'' and ''modelling and simulation''.

	[[File:Tornado diagram.PNG\|thumb\|Tornado Diagram (''adopted from The Standard for Portfolio Management'') <ref name= SPM/>]]		[[File:Tornado diagram.PNG\|thumb\|Tornado Diagram (''adopted from The Standard for Portfolio Management'') <ref name= SPM/>]]

	The ''Sensitivity Analysis'' investigates the risks with the biggest impact on the portfolio. It does that when the other parameters are held to the baseline. It shows the sensitivity of on parameter, which is not the worst-case scenario, but a relatively more likely scenario. The visual output of the ''Sensitivity Analysis'' could be the tornado diagram. This is a strong tool for prioritizing the risks and where to focus the action and response.		The ''Sensitivity Analysis'' investigates the risks with the biggest impact on the portfolio. It does that when the other parameters are held to the baseline. It shows the sensitivity of one parameter, which is not the worst-case scenario, but a relatively more likely scenario. The visual output of the ''Sensitivity Analysis'' could be the tornado diagram. This is a strong tool for prioritizing the risks and where to focus the action and response.

	The ''Modeling and simulation'' could be a ''Monte Carlo Technique <ref name="DS" /> ([[Monte Carlo Simulation of Risk]])''. The simulations and Modeling is based on parametric optimization. The parameters can be several portfolio objectives, that is iteratively randomly simulated. The parameters can have financial, time, quality aspects ~~and~~ basically every important measurable variable can be a parameter. The iteration is typically computer generated. The output can be the most likely scenario or the worst-case scenario.		The ''Modeling and simulation'' could be a ''Monte Carlo Technique <ref name="DS" /> ([[Monte Carlo Simulation of Risk]])''. The simulations and Modeling is based on parametric optimization. The parameters can be several portfolio objectives, that is iteratively randomly simulated. The parameters can have financial, time and quality aspects, but also basically every important measurable variable can be a parameter. The iteration is typically computer generated. The output can be the most likely scenario or the worst-case scenario.

	==Output==		==Output==
	The output of the ''Analyze Portfolio Risks'' ~~is an update of~~ the ''Portfolio Risk Register'' and a ''Portfolio Risk Exposure charts''. The update consists of a ranking of the list of portfolio risks. The priority can be divided into different objectives and give the portfolio manager a better overview on the objectives. The risk breakdown structure should be categorized into either root causes or portfolio objectives by now. Some immediate responses can be a part of the output, but focus should but on the risks impacting in the near future. The risks that is not prioritized should be formulated on a watch-list for monitoring. Since the processes is iterative, some of the risks will occur in the analysis more than once. Therefor information about overall trends should be gathered to control if the anticipated affect is accordingly.		The output of the ''Analyze Portfolio Risks'' updates the ''Portfolio Risk Register'' and implements ''Portfolio Risk Exposure charts''. The update consists of a ranking of the list of portfolio risks. The priority can be divided into different objectives and give the portfolio manager a better overview on the objectives. The risk breakdown structure should be categorized into either root causes or portfolio objectives by now. Some immediate responses can be a part of the output, but focus should but on the risks impacting in the near future. The risks that is not prioritized should be formulated on a watch-list for monitoring. Since the processes is iterative, some of the risks will occur in the analysis more than once. Therefor information about overall trends should be gathered to control if the anticipated affect is accordingly.

	''Portfolio Risk Exposure Charts'' illustrates the probability of the portfolio reaching either tangible or nontangible objectives, even though risks mainly are formulated measurably. The cumulative distribution can for instants show the probability of a certain magnitude.		''Portfolio Risk Exposure Charts'' illustrates the probability of the portfolio reaching either tangible or nontangible objectives, even though risks mainly are formulated measurably. The cumulative distribution can for instants show the probability of a certain magnitude.

← Older revision		Revision as of 08:03, 28 February 2018
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	It is important to realize, that there are 3 types of risks to identify in portfolio risk management<ref name="SPM" />. The types of risks are ''structural risks'', ''component risks'' and ''overall risks''. The ''structural risks'' are the ones related to the interactions between the components. The components consist of either projects or programs. The structural risks are normally threats in form of resource issues, but can also be opportunities in form of niche qualification in the organization.		It is important to realize, that there are 3 types of risks to identify in portfolio risk management<ref name="SPM" />. The types of risks are ''structural risks'', ''component risks'' and ''overall risks''. The ''structural risks'' are the ones related to the interactions between the components. The components consist of either projects or programs. The structural risks are normally threats in form of resource issues, but can also be opportunities in form of niche qualification in the organization.

	''Component Risks'' are normally handled by either the project<ref name="Body" /> or program manager, but the component risks get relevant for the portfolio manager, when the risks escalate and expand out of the mandate, that the component manager has. The reason for this is, that the magnitude of these risks might have significant effect on the portfolio or has a strategic aspect. These kinds of risks are normally related to the three parameters of the Iron Triangle, cost, time and scope.		''Component Risks'' are normally handled by either the project<ref name="Body" /> or program manager, but the component risks get relevant for the portfolio manager, when the risks escalate and expand out of the mandate, that the component manager has. The reason for this is, that the magnitude of these risks might have significant effect on the portfolio or has a strategic aspect or objective. These kinds of risks are normally related to the three parameters of the Iron Triangle, cost, time and scope.

	The last type of risks are the ''overall risks''. The overall risks are the risks that emerges, when components interact in the portfolio. The overall risks i.e. all risks that is not defined in the above-mentioned types of risks. The different components can have different objectives, missions or visions. ~~Overall~~ risks can also give the opportunity of distributing "best practice" to other components.		The last type of risks are the ''overall risks''. The overall risks are the risks that emerges, when components interact in the portfolio. The overall risks i.e. all risks that is not defined in the above-mentioned types of risks. The different components can have different objectives, missions or visions, and therefore the components work in different directions. The overall risks can also give the opportunity of distributing "best practice" to other components.

	[[File:Knowledge sharing.PNG\|thumb\|Illustartes knowledge shared between components <ref name= SPM/>]]		[[File:Knowledge sharing.PNG\|thumb\|Illustartes knowledge shared between components <ref name= SPM/>]]

	Example: A portfolio has four components, called A, B, C and D. Component B finds best practice in a certain area of expertise, that is applicable in component A and D. This gives the opportunity to optimize A and D based on the development in component B.		Example: A portfolio has four components, called A, B, C and D. Component B finds best practice in a certain area of expertise, that is applicable in component A and D. This gives the opportunity to optimize A and D based on the development in component B.


	==Inputs==		==Inputs==
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	''Enterprise Environmental Factors'' is the public information, that affects the portfolio e.g. academic studies and benchmarking among others. In some experienced company’s internal databases are used by sharing gained knowledge throughout the organization, these historical files are called ''Organizational Process Assets''. A third type of input is the ''list of selected portfolio components'', which commonly acts as the baseline of the estimated risks.		''Enterprise Environmental Factors'' is the public information, that affects the portfolio e.g. academic studies and benchmarking among others. In some experienced company’s internal databases are used by sharing gained knowledge throughout the organization, these historical files are called ''Organizational Process Assets''. A third type of input is the ''list of selected portfolio components'', which commonly acts as the baseline of the estimated risks.

	''Portfolio management plan'' provides input from a higher level of management regarding scheduling, risks, cost and quality. The Portfolio management plan shows the known risks in the plan, it allocates the responsibility and budgets, where ~~provision of risks~~ is included. The risks will often be illustrated in a Risk Breakdown Structure.		''Portfolio management plan'' provides input from a higher level of management regarding scheduling, risks, cost and quality. The Portfolio management plan shows the known risks in the plan, it allocates the responsibility and budgets, where the risk fee is included. The risks will often be illustrated in a Risk Breakdown Structure.

	The last type of input is the ''Escalated Component Risks''. It is heavily related to the type of risks called component risks. It is the ones that has escalated out of the component managers mandate.		The last type of input is the ''Escalated Component Risks''. It is heavily related to the type of risks called component risks. It is the ones that has escalated out of the component managers mandate.
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	In the process of identifying the risks and making a Portfolio risk register some tools and techniques are very useful. The different tools and techniques<ref name="SPM" /> are called ''Documentation Reviews'', ''Information Gathering Techniques'', ''Checklist Analysis'', ''Assumptions Analysis'' and ''Diagramming Techniques''. All the tools have pros and cons. It is important to use the appropriate tools and techniques for the specific situation<ref name="Rolf" />.		In the process of identifying the risks and making a Portfolio risk register some tools and techniques are very useful. The different tools and techniques<ref name="SPM" /> are called ''Documentation Reviews'', ''Information Gathering Techniques'', ''Checklist Analysis'', ''Assumptions Analysis'' and ''Diagramming Techniques''. All the tools have pros and cons. It is important to use the appropriate tools and techniques for the specific situation<ref name="Rolf" />.

	The ''Documentation Reviews'' is based on big data gained on component management level and matched it with the portfolio management objectives. The ''Information Gathering Techniques'' is done by either [[Brainstorming technique]]<ref name="Wilson" /> <ref name="Body" /> , Delphi technique <ref name="Linstone" /> <ref name="Geraldi" /> ([[The Delphi Technique in Project Management]]), Interviewing, root cause identification or [[SWOT analysis]]. The ''brainstorming'' is an effective way of making the framework of the identification. It can be done by gathering a group of experts, that simply empty their brains in order to get every possible risk on the table. After this exercise the experts organizes the risks in a risk breakdown structure.		The ''Documentation Reviews'' is based on big data gained on component management level and matched it with the portfolio management objectives. The ''Information Gathering Techniques'' is done by either the [[Brainstorming technique]]<ref name="Wilson" /> <ref name="Body" /> , Delphi technique <ref name="Linstone" /> <ref name="Geraldi" /> ([[The Delphi Technique in Project Management]]), Interviewing, root cause identification or [[SWOT analysis]]. The ''brainstorming'' is an effective way of making the framework of the identification. It can be done by gathering a group of experts, that simply empty their brains in order to get every possible risk on the table. After this exercise the experts organizes the risks in a risk breakdown structure.

	When different agendas cloud the objectivity of the process the ''Delphi technique'' can be used. The participants of the ''Delphi technique'' are a facilitator and a group of experts. They at some point anonymously agree to the facilitators questions regarding the risks.		When different agendas cloud the objectivity of the process the ''Delphi technique'' can be used. The participants of the ''Delphi technique'' are a facilitator and a group of experts. They at some point anonymously agree to the facilitators questions regarding the risks.
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	''Interviews'' can be used to interpret the risks. The participants can be stakeholders <ref name="Stake" /> <ref name="PRINCE2" />, component participants experts, sponsors and so forth.		''Interviews'' can be used to interpret the risks. The participants can be stakeholders <ref name="Stake" /> <ref name="PRINCE2" />, component participants experts, sponsors and so forth.

	Properly the most effective ~~and most difficult~~ tool is the ''Root cause identification''. As the name suggests, the tools focus on the root to the risks. The tool can also be used with the risk breakdown structure, where the risks are categorized by the roots of the risks.		Properly the most effective tool is the ''Root cause identification''. As the name suggests, the tools focus on the root of the risks. The tool can also be used with the risk breakdown structure, where the risks are categorized by the roots of the risks.

	To get a broader perspective the risks related to the dimensions of SWOT-analysis can be effective. It gives both the in-house perspective in relation to strength and weakness and the outgoing perspective of opportunities and threats.		To get a broader perspective the risks related to the dimensions of SWOT-analysis can be effective. It gives both the in-house perspective in relation to strength and weakness and the outgoing perspective of opportunities and threats.
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	==Outputs==		==Outputs==

	The Output of the Identification is the ''Portfolio Risk Register''. It is a supplement to the Portfolio management plan. It consists of a list of i''dentified risks, risk owners, list of potential responses, root causes of risks'' and ''updated risk categories''. It is basically a summarize of the work above. I.e. The risks are lined up with the dedicated manager and the mandated responses. It might also contain the root of the risks, if it is known. The ''Portfolio Risk Register'' should be updated, whenever it is needed<ref name="SPM" />.		The Output of the Identification is the ''Portfolio Risk Register''. It is a supplement to the Portfolio management plan. It consists of a list of i''dentified risks, risk owners, list of potential responses, root causes of risks'' and ''updated risk categories''. It is basically a summarize of the work above. I.e. The risks are lined up with the immediate dedicated manager and the mandated responses. It might also contain the root of the risks, if it is known. The ''Portfolio Risk Register'' should be updated, whenever it is needed<ref name="SPM" />.

	[[File:Analysis.PNG\|center\|1000px\|Ideation tools application]]		[[File:Analysis.PNG\|center\|1000px\|Ideation tools application]]