Create the portfolio management plan including, but not limited to, roles and responsibilities, governance model, escalation procedures, risk tolerances, and governance thresholds, change control and management, key performance indicators, prioritization model, and communication procedures using standards, models, and other organizational assets in order to ensure effective and efficient portfolio management.

Creating a portfolio management plan is a crucial step in ensuring effective and efficient portfolio management. It consists of processes such as defining roles and responsibilities, establishing a governance model and escalation procedures, determining risk tolerances and governance thresholds, defining processes for change control and management, vetting key performance indicators, and setting up a communication procedure.

Defining Roles and Responsibilities

The first step in creating a portfolio management plan is to establish the roles and responsibilities of the portfolio management team. The team should be made up of representatives from various departments of the organization, each bringing their unique expertise and skillset. Some of the key roles in a portfolio management team include:

• Portfolio manager: The person who supervises the development and implementation of the portfolio strategy.
• Project managers: Individuals who manage individual projects within the portfolio.
• Financial analysts: Professionals who analyze financial data and make investment decisions.
• Stakeholders: Individuals or groups affected by the portfolio’s activities. They may provide input and oversight.

Establishing a Governance Model and Escalation Procedures

A governance model helps ensure decision-making aligns with the organization’s strategic goals. In portfolio management, governance should focus on aligning the portfolio with the organization’s strategic objectives, prioritizing projects, allocating resources, and tracking progress.

While creating the governance model, procedures for escalating issues should also be considered. Escalation procedures are critical in identifying who needs to be involved when problems arise. This ensures timely resolution of concerns to prevent potential budget overruns or project delays.

Determining Risk Tolerances and Governance Thresholds

Creating the Portfolio Management Plan requires setting up risk tolerance levels, i.e., the levels of risk the organization is willing to accept. These levels will guide the portfolio manager when making investment decisions.

Governance thresholds refer to the indicators that trigger the intervention of governance in the project. The thresholds should be set up considering different parameters such as budget, time, risk, and quality. For instance, if a project exceeds its allocated budget by a certain percentage, it crosses the governance threshold, requiring intervention.

Defining Processes for Change Control and Management

Portfolio Management Plan must outline the procedures for managing changes. Change control refers to the process of reviewing, documenting, approving or rejecting changes to the project. Effective change control helps to minimize the potential impact of changes on the project’s deliverables and overall timeline.

Identifying Key Performance Indicators (KPIs)

KPIs are crucial elements of a portfolio management plan. They are quantifiable measures used to track and assess progress toward organizational objectives. Some commonly used KPIs in portfolio management include Return on Investment (ROI), Net Present Value (NPV), and Internal Rate of Return (IRR).

Setting up a Communication Procedure

Clear and regular communication is indispensable in portfolio management. A well-defined communication procedure ensures that all stakeholders receive consistent and timely updates. It might include regular status reporting, meetings frequency, preferred communication channels, or any other details necessary for efficient information exchange.

Defining a Prioritization Model

The prioritization model is an integral component of a Portfolio Management Plan. This model will be used to rank the projects based on their relative value to the organization’s strategic objectives. There are various models available like the weighted scoring model, the payback period, or the Present Value.

Creating a comprehensive and well-structured portfolio management plan is the first step towards effective portfolio management. By outlining roles and responsibilities, governance model and escalation procedures, risk tolerances and governance thresholds, change control and management procedures, key performance indicators, a prioritization model and communication procedures, organizations can ensure that their portfolio aligns with the strategic objectives, effectively track and monitor progress, and make informed decisions.

Additionally, the Portfolio Management Professional (PfMP) exam places considerable emphasis on these aspects, so understanding them is critical to success on the exam and in the world of portfolio management.