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BRM - ​​Module 4: Portfolio Management

Module 4: Portfolio Management
Module 1: An overview of BRM

​The video below is ​the first lesson in this module, ​and is part of the Business Relationship Course


Video Transcription

The ‘Business Relationship Management Professional’ foundation course
Module 4 – Portfolio Management
Lesson 1 – The Portfolio Management Context                                                                                            
Welcome to module 4 lesson 1!
In this lesson we’ll study:
The basics of Portfolio Management – what it is and its purpose Portfolio Management and Value Management The relationship of portfolios, programs and projects The investment context of Portfolio ManagementAnd
Managing the lifecycle of Provider investments                                                                                            
I’ll begin by defining Portfolio Management. It’s “The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation, and balancing risk against performance”
A Portfolio represents the totality of a Provider’s investments – new projects or programs, as well as existing services and capabilities.
Let me spend a little time unpicking the definition.                                                                                            
“The art and science of making decisions”– Portfolio Management is a systematic way of making decisions.Systematicimplies consistency, objectivity, repeatability and so on. It carries the promise of being able to compare and prioritize, and to eliminate hunches and guesswork.                                                                                            
The rest of the definition states what we are making decisions about, starting with“investment mix and policy” - the underpinning idea here is that investments can be classified in a number of ways, for example: business objective supported; timescale for payback; degree of risk and so on. A Provider should have an appropriate mix of investments – long-term and short term, high risk and low risk, support for all business objectives. What is appropriate? Well, that’s one of the things Portfolio Management has to decide.                                                                                            
The next part of the definition reads –”matching investments to objectives”. This will inform not just which investments to go ahead with, but also how we’ll make decisions about the mix of investments.                                                                                            
“Asset allocation” is about the best use of the provider’s financial, human and technology resources.                                                                                            
The final part of the definition reads: “balancing risk against performance”. As I’m sure you know, opportunity and risk go together: the greatest opportunities often carry the greatest risk while safety and low returns often go together. Portfolio Management has to achieve an appropriate balance when making investment decisions                                                                                            
The purpose of Portfolio Management can be summarized as a central mechanism to an overall Value Management approach — making investment allocation explicit against strategic choices such as how much to invest in potentially high value but usually risky initiatives versus safe but low value activities.
Portfolio management also acts as a gatekeeper for the provider, ensuring that they only provide services that contribute to strategic objectives and meet the agreed business outcomes.                                                                                            
The benefits of portfolio management include:
Ensuring that the portfolio of investments in Provider capabilities and assets represents business strategy.And
The quantification of previously informal Provider efforts, enabling the measurement and objective evaluation of investment scenarios. All Service Providers make decisions about investments – they must do because they have only limited resources of time and money. The point is that those decisions are not necessarily made consistently and objectively. All too often decisions are based on whoever shouts loudest or even on what seems most attractive from the Provider’s point of view.                                                                                            
The diagram on the screen represents how Portfolio Management is central to Value Management. The portfolio allocation decisions represent business strategic intent.
Click on the elements of the diagram to get more information                                                                                            
Strategize- For example, a company whose business strategy is to offer globally consistent business processes would choose to invest in a globally common infrastructure. A company who wanted each business unit to be free to innovate and be highly responsive to local circumstances, may be less concerned with a globally common infrastructure and place higher value on local IT investments and local decision making about those investments.                                                                                            
Plan– Strategy leads to planning, including the development of Business Cases and prioritization of investment opportunities. Some opportunities will be pursued immediately while others may be deferred until a future time. For example, depending on business priorities an upgrade of the network may be done during the current financial year or put off until the next. Some opportunities may be put on hold and reconsidered at a later date.                                                                                            
Execute– There will typically be a Portfolio of active projects and programs – these comprise a subset of the total portfolio.                                                                                            
Close– This closes the loop of the Value Management cycle, comparing value realized against value projected for a given asset or initiative.                                                                                            
The diagram on your screen illustrates the relationship between the Portfolio, Programs and Projects.
Portfolio Management refers to the system that selects and manages the portfolio of business value opportunities for the enterprise.
Program Management is exercised across a defined set of related projects that have common goals and support common business outcomes. Programs provide a convenient way of managing projects from a strategic perspective – remember, there may be 100+ projects on the go at any one time! Programs connect interdependent projects and provide a link to business outcomes.
Project Management focuses on the completion of a defined piece of work that will deliver one or more specific business products. A project is often defined within the context of a broader program objective. Projects focus on budget, deliverables and schedule.
You might find it useful to make a comparison with how a private individual manages their savings. The portfolio decisions relate to the proportions of savings to be held as cash, bonds, stocks, property and so on. Most individual investors find it easier to manage one or more mutual funds rather than individual stocks. A Mutual Fund can be compared with a Program, and individual stocks with Projects.                                                                                            
This diagram shows that programs and specific projects within a program are defined in terms of a top-down strategy deriving from the Portfolio.
Portfolio Management, of course, not only makes decisions, it must also monitor and evaluate the outcome of those decisions. The diagram shows a flow of information from individual projects up to the relevant program and then to Portfolio Management.
So, good portfolio management practice and discipline really demands good program management discipline, which in turn demands good project management discipline.                                                                                            
The diagram on your screen illustrates the position of Portfolio Management in the wider enterprise investment context.
At the top is Business Planning, comprising corporate strategy, investment planning and value realization monitoring.
At the bottom is Program Management, comprising programs of integrated projects, project & program data collection and reporting, and Enterprise Architecture.
Portfolio Management sits between these two.
Planning information flows from Business Planning, through Portfolio Management to Program Management. This includes information such as business strategies and priorities, budgets and timescales. Execution information flows from Program Management up to Portfolio Management and then to Business Planning. Information such as costs, quantified benefits, risks and so on.                                                                                            
The diagram on your screen shows the lifecycle of Provider investments. You can see that it has three phases: making new investments; managing existing investments; and retiring old investments.
The first phase includes identifying new services or enhancements to existing services that could support Business Outcomes; evaluating, prioritizing and selecting opportunities to implement; and design and transition these new services into operational use.
In the second phase business activity is supported by operational services. These are routinely monitored and adjusted to maintain alignment with business activity. From a Portfolio Management perspective services are reviewed to ensure that they continue to deliver value to the business and remain aligned with business strategy. The review could lead to the service being enhanced with new features, the supporting technology being replaced or even the retirement of the service.
It’s easy to make the mistake of focusing on the first phase – making new investments. But most of the Provider’s budget is spent on existing investments – on existing services and infrastructure.
IT investments, like other investments, have a useful life. They do not last forever. Most organizations spend a disproportionate amount of time on the first two phases of the IT life cycle. Don’t lose sight of the fact that some of your IT investments will need to be retired. The less you clean house, the messier things can get.
Ok, we’re almost finished but before I wrap up this lesson here’s a quiz to check out what you’ve learned
Articulate: insert quiz here                                                                                            
OK that completes this lesson. The key learning points you should take away are:
There are typically too many projects for senior executives and governance bodies to really comprehend and so Program Management provides an essential linkage between Project and Portfolio Management
Programs focus on business outcomes, whereas projects focus on execution (cost, time, deliverables)
Portfolio Management is the central mechanism in an overall Value Management approach and plays a key role not only in prioritizing new investments but also in managing and retiring existing investments.                                                                                            
The next lesson is Lesson 2 where we’ll study the Portfolio Management Framework.
Move on when you’re ready                                                                                           

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The ‘Business Relationship Management Professional’ foundation course
Module 4 – Portfolio Management
Lesson 1 – The Portfolio Management Context                                                                                            
Welcome to module 4 lesson 1!
In this lesson we’ll study:
The basics of Portfolio Management – what it is and its purpose Portfolio Management and Value Management The relationship of portfolios, programs and projects The investment context of Portfolio ManagementAnd
Managing the lifecycle of Provider investments                                                                                            
I’ll begin by defining Portfolio Management. It’s “The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation, and balancing risk against performance”
A Portfolio represents the totality of a Provider’s investments – new projects or programs, as well as existing services and capabilities.
Let me spend a little time unpicking the definition.                                                                                            
“The art and science of making decisions”– Portfolio Management is a systematic way of making decisions.Systematicimplies consistency, objectivity, repeatability and so on. It carries the promise of being able to compare and prioritize, and to eliminate hunches and guesswork.                                                                                            
The rest of the definition states what we are making decisions about, starting with“investment mix and policy” - the underpinning idea here is that investments can be classified in a number of ways, for example: business objective supported; timescale for payback; degree of risk and so on. A Provider should have an appropriate mix of investments – long-term and short term, high risk and low risk, support for all business objectives. What is appropriate? Well, that’s one of the things Portfolio Management has to decide.                                                                                            
The next part of the definition reads –”matching investments to objectives”. This will inform not just which investments to go ahead with, but also how we’ll make decisions about the mix of investments.                                                                                            
“Asset allocation” is about the best use of the provider’s financial, human and technology resources.                                                                                            
The final part of the definition reads: “balancing risk against performance”. As I’m sure you know, opportunity and risk go together: the greatest opportunities often carry the greatest risk while safety and low returns often go together. Portfolio Management has to achieve an appropriate balance when making investment decisions                                                                                            
The purpose of Portfolio Management can be summarized as a central mechanism to an overall Value Management approach — making investment allocation explicit against strategic choices such as how much to invest in potentially high value but usually risky initiatives versus safe but low value activities.
Portfolio management also acts as a gatekeeper for the provider, ensuring that they only provide services that contribute to strategic objectives and meet the agreed business outcomes.                                                                                            
The benefits of portfolio management include:
Ensuring that the portfolio of investments in Provider capabilities and assets represents business strategy.And
The quantification of previously informal Provider efforts, enabling the measurement and objective evaluation of investment scenarios. All Service Providers make decisions about investments – they must do because they have only limited resources of time and money. The point is that those decisions are not necessarily made consistently and objectively. All too often decisions are based on whoever shouts loudest or even on what seems most attractive from the Provider’s point of view.                                                                                            
The diagram on the screen represents how Portfolio Management is central to Value Management. The portfolio allocation decisions represent business strategic intent.
Click on the elements of the diagram to get more information                                                                                            
Strategize- For example, a company whose business strategy is to offer globally consistent business processes would choose to invest in a globally common infrastructure. A company who wanted each business unit to be free to innovate and be highly responsive to local circumstances, may be less concerned with a globally common infrastructure and place higher value on local IT investments and local decision making about those investments.                                                                                            
Plan– Strategy leads to planning, including the development of Business Cases and prioritization of investment opportunities. Some opportunities will be pursued immediately while others may be deferred until a future time. For example, depending on business priorities an upgrade of the network may be done during the current financial year or put off until the next. Some opportunities may be put on hold and reconsidered at a later date.                                                                                            
Execute– There will typically be a Portfolio of active projects and programs – these comprise a subset of the total portfolio.                                                                                            
Close– This closes the loop of the Value Management cycle, comparing value realized against value projected for a given asset or initiative.                                                                                            
The diagram on your screen illustrates the relationship between the Portfolio, Programs and Projects.
Portfolio Management refers to the system that selects and manages the portfolio of business value opportunities for the enterprise.
Program Management is exercised across a defined set of related projects that have common goals and support common business outcomes. Programs provide a convenient way of managing projects from a strategic perspective – remember, there may be 100+ projects on the go at any one time! Programs connect interdependent projects and provide a link to business outcomes.
Project Management focuses on the completion of a defined piece of work that will deliver one or more specific business products. A project is often defined within the context of a broader program objective. Projects focus on budget, deliverables and schedule.
You might find it useful to make a comparison with how a private individual manages their savings. The portfolio decisions relate to the proportions of savings to be held as cash, bonds, stocks, property and so on. Most individual investors find it easier to manage one or more mutual funds rather than individual stocks. A Mutual Fund can be compared with a Program, and individual stocks with Projects.                                                                                            
This diagram shows that programs and specific projects within a program are defined in terms of a top-down strategy deriving from the Portfolio.
Portfolio Management, of course, not only makes decisions, it must also monitor and evaluate the outcome of those decisions. The diagram shows a flow of information from individual projects up to the relevant program and then to Portfolio Management.
So, good portfolio management practice and discipline really demands good program management discipline, which in turn demands good project management discipline.                                                                                            
The diagram on your screen illustrates the position of Portfolio Management in the wider enterprise investment context.
At the top is Business Planning, comprising corporate strategy, investment planning and value realization monitoring.
At the bottom is Program Management, comprising programs of integrated projects, project & program data collection and reporting, and Enterprise Architecture.
Portfolio Management sits between these two.
Planning information flows from Business Planning, through Portfolio Management to Program Management. This includes information such as business strategies and priorities, budgets and timescales. Execution information flows from Program Management up to Portfolio Management and then to Business Planning. Information such as costs, quantified benefits, risks and so on.                                                                                            
The diagram on your screen shows the lifecycle of Provider investments. You can see that it has three phases: making new investments; managing existing investments; and retiring old investments.
The first phase includes identifying new services or enhancements to existing services that could support Business Outcomes; evaluating, prioritizing and selecting opportunities to implement; and design and transition these new services into operational use.
In the second phase business activity is supported by operational services. These are routinely monitored and adjusted to maintain alignment with business activity. From a Portfolio Management perspective services are reviewed to ensure that they continue to deliver value to the business and remain aligned with business strategy. The review could lead to the service being enhanced with new features, the supporting technology being replaced or even the retirement of the service.
It’s easy to make the mistake of focusing on the first phase – making new investments. But most of the Provider’s budget is spent on existing investments – on existing services and infrastructure.
IT investments, like other investments, have a useful life. They do not last forever. Most organizations spend a disproportionate amount of time on the first two phases of the IT life cycle. Don’t lose sight of the fact that some of your IT investments will need to be retired. The less you clean house, the messier things can get.
Ok, we’re almost finished but before I wrap up this lesson here’s a quiz to check out what you’ve learned
Articulate: insert quiz here                                                                                            
OK that completes this lesson. The key learning points you should take away are:
There are typically too many projects for senior executives and governance bodies to really comprehend and so Program Management provides an essential linkage between Project and Portfolio Management
Programs focus on business outcomes, whereas projects focus on execution (cost, time, deliverables)
Portfolio Management is the central mechanism in an overall Value Management approach and plays a key role not only in prioritizing new investments but also in managing and retiring existing investments.                                                                                            
The next lesson is Lesson 2 where we’ll study the Portfolio Management Framework.
Move on when you’re ready                                                                                           
The Business Relationship Management Professional Exam
​The certification is aimed at anyone working or looking to work in a business relationship environment, such as buyers, sales teams and customer service advisors. However, it may also be of use to business owners, project managers and others involved in business processes.

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