At the project level, risk appetite influences how a project is managed—for
instance, how resources are allocated. At the portfolio level, however, it drives
whether an organization decides to do the project in the first place.
“In a project environment, I’m talking about appetite for a specific approach
to the project,” Mr. Vargas explains. “In the portfolio analysis, I’m talking about
appetite for more risky projects.”
Assessing risk across all projects in a portfolio helps organizations determine
which projects have the highest likelihood of delivering the most value. With
that in mind, Ms. Schoeman says, risk appetite should be considered in the con-
text of strategic planning.
“This metric illustrates the confidence level across the portfolio in achieving
strategic objectives,” she says. “It illustrates to executive stakeholders the degree
of risk management maturity by either being a conservative or aggressive portfolio. It also allows stakeholders a view of potential uncertainties and their impact
on achieving strategic objectives. Finally, it allows for executive decision-making
when a risk-adjusted schedule is presented to counteract uncertainties.”
“in a project
i’m talking about
appetite for a
specific approach to
the project. in the
i’m talking about
appetite for more
—Ricardo Viana Vargas, PMI-RMP,
Making Metrics Matter
While each metric measures one piece of the portfolio’s health,
how portfolio managers react to the complete picture is what
ultimately defines a portfolio’s success.
“The portfolio manager must constantly make course corrections to defined projects as the business goals and objectives
change to maintain alignment of the portfolio to the company’s
goals and objectives,” Ms. Schoeman says.
In that way, a project portfolio is a lot like a stock portfolio.
The reason to collect metrics in the first place is to evaluate in real
time the portfolio’s performance, then calibrate it by periodically
adjusting—adding, deleting or modifying—individual holdings.
“As portfolio managers, first we use a set of criteria to decide
what projects we should do. After that, we monitor them like
stocks, because maybe we’ll get new information that will cause
us to reshape or maybe even stop a project,” Mr. Vargas says. “It’s
more art than science—some companies do it every day, some
every quarter, some every six months—but you should definitely
re-balance your portfolio on a regular basis.” PM