70 ◾ PfMP® Exam Practice Tests and Study Guide
possibility of positive events while decreasing any that may adversely affect the
portfolio considering value, the strategic t, and portfolio balance.
This approach means active consideration of the organization environment
to evaluate its management practices and approaches, the number of concurrent
components, and the dependency on stakeholders external to the organization
for component and overall portfolio success. It then is critical in portfolio risk
management to determine the root cause of any negative risks and correct it as
well as to capitalize on potential positive opportunities.
Reserves are needed at the portfolio level because of possible threats, and
their management is a responsibility of the portfolio manager. The portfolio man-
ager also can in some cases aggregate risk responses through common character-
istics and often relies on equity protection. The emphasis is on risk planning, risk
assessment, and response.
As well, external, structural, and execution risks may arise and require consid-
eration. Anyone can identify risks, and the culture should be one in which open
communication about risks is encouraged. But, people at different levels also
will have different perspectives regarding risk and different concerns to address.
Issues of transparency, organizational integrity, and corruption are other con-
siderations especially since risks at the portfolio level are greater than the sum
of those at the program or project levels. Risk thresholds and overall organiza-
tional attitudes toward risk require identication to see if the organization is risk
adverse, tolerant or risk taking. Since internal portfolio risks are greater if they
occur, resource commitments then may be required for positive or negative risks.
The portfolio risk management plan describes the approach that will be
followed with references to any applicable organizational policies and is used
to assess new risks in proposed components as well as overall portfolio risk.
The plan also shows how the portfolio oversight group will balance investments
against expected return for known risks to support risk- based decisions.
In developing the plan, it is useful to review the portfolio management plan,
portfolio and organizational process assets, and enterprise environmental factors.
Useful tools and techniques include weighted ranking and scoring techniques.
These are helpful especially in organizations with multiple portfolios and can be
applied to technical and management risks. High- level risk plans can be dened
by these techniques along with cost elements and schedule activities and needed
risk contingency reserves. Graphical analytical techniques also are useful such as
a probability/ impact matrix as shown in Figure8-5 in The Standard. Other con-
siderations include importance, timing, interdependencies, condence limits, and
prioritized risk lists. A number of different quantitative and qualitative techniques
can be used such as status and trend analysis, rebalancing methods, different
investment approaches, and risk exposure charts. These charts, for example,
can provide useful information such as the outcome probability analysis of the
portfolio and the probability of achieving the portfolio’s objectives, as shown in
Figure8-6.