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Portfolio Governance

5 minutes 5 Questions

Portfolio governance involves the policies, procedures, standards, and processes that guide project portfolio management. These may include project selection and prioritization criteria, decision making processes, performance measurement and reporting standards, risk management standards, or resource management policies. A strong governance framework helps ensure consistency, keeps everyone on the same page, and provides a foundation for making informed decisions about the portfolio.

Guide for Portfolio Governance

Portfolio Governance is a crucial aspect of portfolio management in organizations.

Importance: It ensures the alignment of investment decisions with the organization's strategic objectives. Through portfolio governance, organizations can effectively manage risk, prioritize projects, and optimize resource allocation.

What it is: Portfolio Governance is the process by which organizations manage, monitor and control their project and program portfolios. It involves making decisions the entire portfolio and managing the dependencies, risks, and performance of all projects and programs within the portfolio.

How it works: The portfolio management team, together with management and stakeholders, establish the portfolio governance structure which includes roles, responsibilities, decision making processes, and policies. This framework guides the prioritization of projects, allocation of resources, risk management, and performance evaluation.

Exam Tips: When answering questions on Portfolio Governance in an exam, focus on its role in aligning projects with strategic objectives, managing risk and resources, and ensuring performance. Use specific examples from case studies or real-world situations. Understand the structure of portfolio governance and the roles and responsibilities involved. Be able to explain how it works in practice and the benefits it brings to an organization.

Always remember, the purpose of portfolio governance is to ensure efficiency, increase value, and maintain alignment with the strategic objectives of the organization.

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CAPM - Project Portfolio Management Example Questions

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Question 1

A medium-sized enterprise expanded their IT service portfolio rapidly, leading to a high level of complexity. Management is struggling with the portfolio governance. What is the best approach to address this problem?

Correct Answer: Implement an effective service portfolio management process

An effective service portfolio management process can help the organization to better govern the service portfolio, ensuring alignment with business objectives and managing complexity effectively.

Question 2

While assessing potential new projects for the portfolio, the Portfolio Governance Committee identified two projects with similar strategic alignment. To aid in decision-making, what should be the committee's primary focus?

Correct Answer: Comparative risk-benefit analysis

When a Portfolio Governance Committee is assessing potential new projects, especially when those projects are similar in strategic alignment, the primary focus should be on conducting a comparative risk-benefit analysis. This involves a thorough evaluation of the potential risks and benefits of each project in order to make an informed decision about which project would offer the best value and align with the overall portfolio strategy. A comparative risk-benefit analysis seeks to balance potential rewards with the risks involved, considering various factors such as financial, operational, market, and strategic risks in relation to the project benefits. This method of analysis provides the committee with a comprehensive understanding of the potential impact of each project on the portfolio. Choosing projects based solely on projected costs disregards other critical factors such as benefits, risks, and strategic considerations that could affect the long-term success of the portfolio. Selection based on the personal interests of committee members is unethical and does not serve the best interest of the organization. Focusing solely on immediate technological benefits without regard for long-term strategy can lead to decisions that might conflict with the strategic direction and long-term goals of the portfolio. Therefore, these other options are not suitable primary focuses for a committee in charge of making such important strategic decisions.

Question 3

A multinational organization has a diverse project portfolio across different business units. The CEO is struggling with portfolio governance and wants to ensure efficient reporting mechanism. What should the organization adopt?

Correct Answer: The organization should adopt a centralized portfolio management system for efficient reporting and tracking of each project.

A centralized Portfolio Management System (PMS) would be the best course of action for the organization. It allows for a seamless, efficient reporting mechanism and tracking of each project within the portfolio. This approach provides the CEO with a holistic view of all projects across diverse business units. The other possible answers are not as effective. Keeping separate reporting for each business unit can lead to inconsistencies and a lack of collaboration. Abolishing any form of reporting evades accountability and lean principles of project management. Reporting only unsuccessful projects does not facilitate a learning environment, as successful projects can also provide useful insights for future project planning and execution.

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