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268 DEFINING AND IMPLEMENTING PPM

Practical Project Portfolio Management and Risk Assessment

So, in order for this modern Project Portfolio Management to work, we need to
get back to the sound basics of identifying a range of satisfactory performance
parameters for any project. We have to have a predetermination of acceptable
performance, so we can set alarms and alerts within the Project Portfolio Man-
agement system to advise us of out-of-tolerance conditions. The ROI analysis
can’t assume just a single result. It must consider a spread of possible scope,
time, cost, and quality conditions and identify what values (limits) reduce the
ROI to an unacceptable number.

• When does an increase in time-to-market make the project significantly less
attractive?

• How much of a cost overrun can be tolerated before it blows the pro-
jected profit?

• When does a reduction in scope reduce the expected benefits of the project?

We must consider if the project is worth the risk. This means conducting a
thorough risk assessment, identifying both the potential for risk and the impact of
risk events. We must consider risk mitigation actions. And then we must evaluate
whether the project is still worthwhile after factoring in the costs of risk mitiga-
tion. After we have considered the risks, does this project still support the higher-
level objectives and strategy?

The New Project Portfolio Team

To make this whole thing work, we have to have specialists who are responsible
for evaluating and communicating these essential business/project data. We are
already getting management to accept the necessity of the Project Office. Next,
we have to expand this to include people who will be responsible for portfolio and
risk management. Why not a Chief Risk Officer (CRO)? How about a Project
Portfolio Manager (PPM)? And, with the increased concern for resource avail-
ability and utilization, perhaps a Chief Human Resources Officer (CHRO) could
be justified.

In this enlightened environment, no project should be considered without re-
view by the CRO. No resources should be allocated without review by the
CHRO. And no project should be added or removed from the portfolio without
review by the PPM. I can see an advisory committee, made up of these three
managers, plus the CPO, the Chief Project Officer (or head of the Project Office)
and the CFO, to decide on project viability and management of the portfolio. It is