Risk Management in Portfolios, Programs, and Projects: A Practice Guide

About the Book

Risk Management in Portfolios, Programs, and Projects: A Practice Guide presents updated and expanded strategies for the management of risks in portfolio, program, and project planning.
This new practice guide introduces practical knowledge, examples, and a working case study to serve as an example of how risk management can be addressed, given the fact that certain events or conditions-whether expected or unforeseen during the planning process-may occur, with potential impacts on portfolio, program, and project objectives. Risk impacts can be positive or negative, and may cause deviation from the intended objectives. Risk management processes allow for proactive planning to help maximize positive impacts and minimize negative impacts for organizations.


This practice guide:
Identifies and elaborates upon the core principles of risk management;
Describes the fundamentals of risk management within portfolio, program, and project environments, respectively;
Defines the risk management life cycle;
Applies risk management principles to the respective portfolio, program, and project management performance domains within the context of an enterprise risk management (ERM) approach, using working examples and a full case study to help make connections; and
Contains information for practitioners applying risk management techniques, tools, processes, and good practices while executing a portfolio, program, or project management plan.


Risk Management in Portfolios, Programs, and Projects: A Practice Guide is aligned as a supplemental resource to the latest PMI American National Standards Institute (ANSI)-approved standards and A Guide to the Project Management Body of Knowledge (PMBOK Guide)-Seventh Edition.
The content in this practice guide reflects a consistent approach across the PMI Risk Management Professional (PMI-RMP) certification and other PMI learning products.

Table of Contents:
Table of Contents
Introduction..................................................................................................................... 1
Purpose of This Practice Guide......................................................................................................................................... 2
Approach of This Practice Guide......................................................................................................................................... 2
Audience for This Practice Guide......................................................................................................................................... 3
Principles of Risk Management......................................................................................................................................... 3
Strive to Achieve Excellence in the Practice of Risk Management............................................................................................................................. 3
Align Risk Management with Organizational Strategy, Governance Practices, and Project Management Performance Domains.......................................................................................................................... 4
Focus on the Higher Risk Value............................................................................................................................. 4
Optimize Risk Responses to Focus on Value Realization............................................................................................................................. 4
Foster a Culture That Embraces Risk Management............................................................................................................................. 5
Navigate Complexity Using Risk Management to Enable Successful Outcomes
and Value Realization............................................................................................................................. 5
Continuously Improve Risk Management Competencies............................................................................................................................. 5
Structure of This Practice Guide......................................................................................................................................... 6
ContextandKeyConceptsofRiskManagement..................................................................................................................... 7
Key Concepts and Definitions......................................................................................................................................... 7
Risk............................................................................................................................. 7
Risk Attitude............................................................................................................................. 9
Risk Appetite.......................................................................................................................... 10
Risk Threshold.......................................................................................................................... 11
Uncertainty.......................................................................................................................... 12
Risk Management in Organizations....................................................................................................................................... 12
Risk Management at Different Organizational Levels....................................................................................................................................... 13
Enterprise.......................................................................................................................... 13
Portfolio.......................................................................................................................... 15
Program.......................................................................................................................... 16
Project.......................................................................................................................... 17
Key Success Factors....................................................................................................................................... 17
FrameworkforRiskManagementinPortfolio,Program,andProjectManagement................................................................................................................... 21
Business Context of Risk Management in Portfolio, Program, and Project Management....................................................................................................................................... 21
Organizational Framework.......................................................................................................................... 22
Organizational Context.......................................................................................................................... 24
Strategic and Organizational Planning.......................................................................................................................... 24
Linking Planning with Execution through Portfolio, Program, and
Project Management.......................................................................................................................... 24
Scope of Accountability, Responsibility, and Authority....................................................................................................................................... 25
Accountability at the Enterprise Level.......................................................................................................................... 25
Accountability at the Portfolio Level.......................................................................................................................... 26
Accountability at the Program Level.......................................................................................................................... 26
Accountability at the Project Level.......................................................................................................................... 27
General Approaches to Risk Management....................................................................................................................................... 28
Factors for Evaluating Risk.......................................................................................................................... 29
Responding to Risks.......................................................................................................................... 30 RiskManagementLifeCycleinPortfolio,Program,andProjectManagement.... 33
Introduction to the Risk Management Life Cycle......................................................... 33
Case Study: Introduction to the Compact Wind Turbine Project.............................. 35
Risk Management in Adaptive, Predictive, and Hybrid Project Management.................................................................................................................................... 36
Integrating Project Risk Management and Organizational Risk Management.................................................................................................................................... 38
Risk Escalation........................................................................................................... 41
Case Study: Risk Escalation in the Compact Wind Turbine Project........................... 42
Organizational Project Management and Its Application in Risk Management............................................................................................................. 42
Plan Risk Management......................................................................................................... 44
Purpose of Plan Risk Management....................................................................... 44
Case Study: Tailoring and Scaling the Risk Management Plan in the
Compact Wind Turbine Project............................................................................... 46
Key Success Factors for Plan Risk Management.................................................. 46
Case Study: Planning Risk Management in the Compact Wind Turbine Project... 47
Identify Risks......................................................................................................................... 47
Purpose of Identify Risks....................................................................................... 48
Key Success Factors for Identify Risks................................................................. 48
Case  Study: Identifying Risks in the Compact Wind Turbine Project..................... 50
Perform Qualitative Risk Analysis..................................................................................... 50
Purpose of Perform Qualitative Risk Analysis.................................................... 50
Key Success Factors for Perform Qualitative Risk Analysis.............................. 51
Perform Quantitative Risk Analysis................................................................................... 51
Purpose of Perform Quantitative Risk Analysis................................................. 51
Key Success Factors for Perform Quantitative Risk Analysis........................... 52
Plan Risk Responses............................................................................................................. 52
Case Study: Responses to Threats in the Compact Wind Turbine Project............... 53
Case Study: Responses to Opportunities in the Compact Wind Turbine Project.. 55
Purpose of Plan Risk Responses............................................................................ 57
Key Success Factors for Plan Risk Responses..................................................... 57
Case Study: Planning Risk Responses in the Compact Wind Turbine Project......... 58
Implement Risk Responses................................................................................................. 59
Purpose of Implement Risk Responses............................................................... 59
Key Success Factors for Implement Risk Responses......................................... 59
Case Study: Implementing Risk Responses in the Compact Wind Turbine Project 60
Monitor Risks........................................................................................................................ 60
Purpose of Monitor Risks....................................................................................... 61
Key Success Factors for Monitor Risks................................................................ 61
Case Study: Monitoring Risks in the Compact Wind Turbine Project....................... 62
RiskManagementintheContextofPortfolioManagement............................... 63
Interconnectedness of Risks in Portfolios, Programs, and Projects........................... 63
Risk Efficiency and Risk-Return Trade-Offs........................................................ 63
Case Study: Portfolio Management in the Context of the Compact Wind Turbine Project.................................................................................................................................... 63
Risk Exposure in Portfolios.................................................................................... 64
Role of Portfolio Manager....................................................................................... 64
Risk-Efficient Boundary and Organizational Strategy...................................... 64
Case Study: The Risk-Efficient Boundary in the Compact Wind Turbine Project.... 65
Emerging Trends in Portfolio Risk Management................................................ 65
Case Study: Incorporating Emerging Trends in the Compact Wind Turbine Project................................................................................................................................................. 66 Portfolio Risk Management Life Cycle.................................................................. 67
Portfolio Risk Identification........................................................................... 67
Case Study: Strategic-Level Portfolio Risks in the Compact Wind Turbine Project.......................................................................................................................... 68
Portfolio Risk Qualitative and Quantitative Analyses............................. 68
Case Study: Portfolio Risk Analyses in the Compact Wind Turbine Project.. 69
Portfolio Risk Response Strategies............................................................. 69
Implementing Portfolio Risk Responses................................................... 70
Monitoring Portfolio Risks.......................................................................... 70
Integration of Risk Management into the Portfolio Management Performance Domains.............................................................................................. 70
RiskManagementintheContextofProgramManagement....................... 73
Distinctions and Challenges in Program Risk Management.............................. 73
Understanding Program Risk Management.............................................. 73
Sources, Nature, and Types of Program Risks.......................................... 73
Bridging the Risk Management Gaps among the Portfolio, Program, and
Project Levels.................................................................................................. 74
Managing Program Overall and Individual Risks................................... 76
Achieving Flexibility and Resilience in Program Risk Management.... 76
Program Risk Management Implementation Challenges..................... 77
Program Risk Management Life Cycle.................................................................. 80
Program Risk Identification........................................................................... 80
Case Study: Program Management in the Context of the Compact Wind Turbine Project........................................................................................................... 80
Program Risk Qualitative and Quantitative Analyses............................. 81
Case Study: Program Risk Analyses in the Compact Wind Turbine Project... 82
Program Risk Response Strategies............................................................. 83
Case Study: Program Risk Response Strategies in the Compact Wind Turbine Project.......................................................................................................................... 83
Implementing Program Risk Responses................................................... 84
Monitoring Program Risks........................................................................... 84
Case Study: Monitoring Program Risks in the Compact Wind Turbine Project....................................................................................................................................... 85
Integration of Risk Management into the Program Management Performance Domains.............................................................................................. 85
Strategic Alignment....................................................................................... 85
Benefits Management.................................................................................. 86
Stakeholder Engagement............................................................................ 86
Governance Framework............................................................................... 87
Collaboration.................................................................................................. 87
Life Cycle Management.................................................................................. 88
Case Study: Program Management Performance Domains in the
Compact Wind Turbine Project..................................................................... 88
Program Activities............................................................................................ 90
Case Study: Program Activities in the Compact Wind Turbine Project.......... 90
RiskManagementintheContextofProjectManagement.......................... 91
Risk Management Gaps among the Project and Higher Levels...................... 91
Establishing Risk Thresholds....................................................................... 91
Addressing Risks from Higher and Strategic Levels............................... 92
Project-Level Risk Interfaces with Operations......................................... 92
Project Risk Management Life Cycle..................................................................... 92
Enhancing Risk Analysis and Involving the Right Participants............. 92
Case Study: Project Management in the Context of the Compact Wind Turbine Project........................................................................................................... 93 Project Risk Identification........................................................................................ 93
Case Study: Project Risk Identification in the Compact Wind Turbine Project....... 95
Project Risk Qualitative and Quantitative Analyses.......................................... 96
Case Study: Project Risk Analyses in the Compact Wind Turbine Project............... 96
Project Risk Response Strategies.......................................................................... 97
Case Study: Project Risk Response Strategies in the Compact Wind Turbine Project................................................................................................................................................. 97
Implementing Project Risk Responses................................................................ 97
Case Study: Implementing Project Risk Responses in the Compact Wind Turbine Project.................................................................................................................................... 97
Monitoring Project Risk......................................................................................... 98
Case Study: Monitoring Project Risk in the Compact Wind Turbine Project........... 98
Integration of Risk Management into Project Management Processes................... 99
Initiating Processes................................................................................................. 99
Planning Processes................................................................................................. 99
Executing Processes............................................................................................. 100
Monitoring and Controlling Processes............................................................. 100
Closing Processes.................................................................................................. 100
Case Study: Integration of Risk Management into the Project Management
Processes in the Compact Wind Turbine Project............................................... 100
Project Risk Management Controls............................................................................... 102
References........................................................................................................... 103
AppendixX1ContributorsandReviewersofRiskManagementinPortfolios,
Programs, and Projects: A Practice Guide............................................................... 105
X1.1 Contributors..................................................................................................................... 105
X1.2 PMI Team Members......................................................................................................... 107
AppendixX2TechniquesfortheRiskManagementFramework........................... 109
X2.1  Risk Management Planning........................................................................................... 109
X2.2  Identify Risks.................................................................................................................... 110
X2.2.1    Assumptions and Constraints Analysis...................................................... 111
X2.2.2    Brainstorming................................................................................................... 112
X2.2.3    Cause and Effect (Ishikawa) Diagrams........................................................ 112
X2.2.4    Checklists.......................................................................................................... 112
X2.2.5    Delphi Technique............................................................................................ 113
X2.2.6    Document Review.......................................................................................... 113
X2.2.7    Expert Judgment.............................................................................................. 113
X2.2.8    Facilitation......................................................................................................... 113
X2.2.9    Historical Information..................................................................................... 114
X2.2.10 Interviews......................................................................................................... 114
X2.2.11 Prompt Lists..................................................................................................... 114
X2.2.12 Questionnaires................................................................................................. 114
X2.2.13 Root Cause Analysis........................................................................................ 115
X2.2.14 SWOT Analysis.................................................................................................. 115
X2.2.15 Premortem....................................................................................................... 116
X2.3  Qualitative Risk Analysis................................................................................................. 116
X2.3.1    Affinity Diagrams............................................................................................. 116
X2.3.2    Analytic Hierarchy Process........................................................................... 116
X2.3.3    Influence Diagrams......................................................................................... 117 X2.3.4    Nominal Group Technique.................................................................. 117
X2.3.5    Probability and Impact Matrixes....................................................... 118
X2.3.6    Risk Data Quality Analysis................................................................... 118
X2.3.7    Assessment of Other Risk Parameters.............................................. 118
X2.3.8    System Dynamics.................................................................................. 119
X2.4  Quantitative Risk Analysis.................................................................................... 119
X2.4.1    Contingency Reserve Estimation....................................................... 119
X2.4.2    Decision Tree Analysis.......................................................................... 120
X2.4.3    Estimating Techniques Applied to Probability and Impact.......... 120
X2.4.4    Expected Monetary Value................................................................... 121
X2.4.5    Failure Modes and Effects Analysis/Fault Tree Analysis................ 121
X2.4.6    Monte Carlo Simulation........................................................................ 121
X2.4.7    Program or Project Evaluation and Review Technique................. 122
X2.5  Plan Risk Responses............................................................................................... 122
X2.5.1    Contingency Planning......................................................................... 123
X2.5.2    Force Field Analysis............................................................................... 123
X2.5.3    Multicriteria Selection Technique...................................................... 124
X2.5.4    Scenario Analysis................................................................................... 124
X2.5.5    Simulation............................................................................................... 124
X2.6  Response Plan Implementation........................................................................... 124
X2.7  Monitor Risks......................................................................................................... 125
X2.7.1    Data Analytics........................................................................................ 125
X2.7.2    Reserve Analysis.................................................................................... 125
X2.7.3    Residual Impact Analysis..................................................................... 125
X2.7.4    Risk Audit................................................................................................ 125
X2.7.5    Risk Breakdown Structure................................................................... 125
X2.7.6    Risk Reassessment................................................................................. 126
X2.7.7    Sensitivity Analysis................................................................................ 126
X2.7.8    Status Meetings..................................................................................... 127
X2.7.9    Trend Analysis........................................................................................ 127
X2.7.10 Variance Analysis................................................................................... 127
X2.8  Risk Management Techniques Recap............................................................... 127
AppendixX3RiskClassification................................................................... 133
Glossary...................................................................................................... 135
Index............................................................................................................ 139

About the Author :

PMI is the global authority in project management, committed to advancing the project management profession. We empower project professionals around the globe to excel in project management practices through our growing global community, knowledge sharing, and best-in-class certifications- driving positive change in organizations and communities.