Back to Project Portfolio Management

Portfolio Value Management

5 minutes 5 Questions

Portfolio Value Management focuses on evaluation and demonstration of the value delivered by the project portfolio. It includes techniques to assess project value in terms of financial and strategic contributions, and measure obtained value against planned value from portfolio perspective. Value management helps in guiding strategic decision such as selection and prioritization of projects, allocation of resources, and verification of success in meeting business objectives. Value management ensures an objective approach to maximize value of the portfolio through balanced selection and execution of projects.

Guide: Portfolio Value Management

What is Portfolio Value Management?
Portfolio Value Management, also known as Value-Based Portfolio Management, is a project portfolio management technique where projects are managed and evaluated based on their expected economic value. This approach helps organizations prioritize their projects and initiatives to maximize their overall portfolio value.

Why is it Important?
Portfolio Value Management is critical because it ensures that companies invest their resources - time, budget, personnel - in projects that provide the maximum value and align with strategic objectives. These decisions can significantly impact the success and profitability of the organization.

How Does it Work?
It involves objective estimation of the economic value of projects, which factors in the cost, benefits, risks, and timing. The expected economic value could encompass direct financial gains, strategic alignment, or other non-tangible benefits. The projects with the greatest expected value should be prioritized for execution.

Exam Tips: Answering Questions on Portfolio Value Management

  • Understand the basic concept: Make sure you grasp the basic principals of Portfolio Value Management and can explain it concisely.
  • Application: Be prepared to offer an example of how Portfolio Value Management can be applied in a real-world scenario.
  • Link to strategic objectives: Demonstrating how Portfolio Value Management aligns with the strategic objectives of a business is often a key component to exam questions.
  • Comparative Analysis: You should understand how to compare the value of different projects within a portfolio objectively.

Test mode:
Start practice test
CAPM - Project Portfolio Management Example Questions

Test your knowledge of Amazon Simple Storage Service (S3)

Question 1

A new competitor enters the market with a disruptive technology. As a portfolio manager, how should you respond to maintain portfolio value?

Correct Answer: Reassess project priorities and reallocate resources to competitive initiatives

The best response to a new competitor entering the market with disruptive technology is to reassess project priorities and reallocate resources to competitive initiatives. This approach allows the portfolio manager to:

1. Quickly adapt to the changing market conditions
2. Focus on projects that can counter the competitor's advantage
3. Maintain portfolio value by staying competitive

This strategy is proactive and allows for flexibility in resource allocation to address the new threat.

The other options are less effective:

Continuing with the current portfolio strategy is too passive and may lead to loss of market share.

Investing heavily in replicating the competitor's technology may be costly and time-consuming, potentially leaving the company vulnerable in the short term.

Reducing projects to focus on core competencies and cost-cutting might help financially but doesn't address the competitive threat directly and could limit future growth opportunities.

The chosen answer provides the best balance of adaptability, competitiveness, and resource management to maintain portfolio value in the face of disruptive competition.

Question 2

A company adopts a new business strategy that includes launching 3 new products. As a portfolio manager, which approach should you take to ensure the portfolio value is in line with this new strategy?

Correct Answer: Re-align the portfolio to meet the new strategic objectives and launch the products in phases.

The best approach is to 'Re-align the portfolio to meet the new strategic objectives and launch the products in phases.' This will ensure that the portfolio not only aligns with the company's new strategy but also properly managed, allowing for an efficient launch. If a product encounters unexpected issues, launching in phases allows a company to make necessary corrections without affecting the entire portfolio. The other methods are not ideal because discontinuing all ongoing projects could harm the company if the new products do not perform as expected. Also, allowing teams to decide the best way to incorporate new products could create inconsistency and confusion. Finally, launching all 3 products at the same time could overwhelm the market and the company's resources, potentially leading to failure in achieving the desired outcome.

Question 3

Your company has recently acquired a smaller firm. How should you restructure the portfolio to create value from the merger?

Correct Answer: Identify synergies between your company and the acquired firm and integrate relevant projects from the firm into the portfolio.

The ideal way to add value following a merger is to identify synergies between the two companies and integrate relevant projects from the acquired firm into the portfolio (pk: 155690). This allows for cooperative performance which often results in increased efficiency and innovation. Ignoring the smaller firm's portfolio (pk: 155691) is not beneficial as you may miss out on valuable projects they have. Simply replacing underperforming projects with top-performing ones from the acquired firm's portfolio irrespective of strategic alignment (pk: 155692) may not bring the expected results as it could disturb the balance in your current portfolio. Immediately dissolving all of the smaller firm's projects (pk: 155693) is also not the best way to create value because you risk losing potentially potentially valuable assets and compromising the diversification of your company's portfolio.

Go Premium

Certified Associate in Project Management Preparation Package (2024)

  • Earn 15 PDUs needed for your CAPM certification
  • 4454 Superior-grade Certified Associate in Project Management practice questions.
  • Accelerated Mastery: Deep dive into critical topics to fast-track your mastery.
  • Unlock Effortless CAPM preparation: 5 full exams.
  • 100% Satisfaction Guaranteed: Full refund with no questions if unsatisfied.
  • Bonus: If you upgrade now you get upgraded access to all courses
  • Risk-Free Decision: Start with a 7-day free trial - get premium features at no cost!
More Portfolio Value Management questions
12 questions (total)
Start 12 question test