Concepts
Understanding portfolio management standards is an integral part of the Portfolio Management Professional (PfMP) exam. Let’s dive into the standards, protocols, rules, and best practices using organizational assets like information systems and industry standards.
1. Portfolio Management Standards
These are a set of practices designed to guide portfolio managers to manage portfolios effectively and efficiently. The internationally recognized organization, Project Management Institute (PMI), has developed a set of standards known as The Standard for Portfolio Management. According to this, a portfolio should be aligned with the strategic objectives of the organization and provide a means to optimize its resources.
2. Protocols
Protocols are established operations and ways that portfolio managers use to carry out portfolio management activities. These are generally derived from best practices and industry standards. For instance, a protocol might be to regularly update stakeholders with portfolio status reports.
3. Rules
Rules are specific instructions that guide how to perform portfolio management activities. These might include risk management procedures, quality management procedures, etc. For example, an organization could have a rule that all projects within the portfolio should undergo a risk assessment periodically.
4. Best Practices
Best practices refer to the most effective methods or techniques used in portfolio management, which have been proven through experience and research to lead to a desired result. They can include elements like routine portfolio review, balancing portfolio risk and return, and ensuring strategic alignment.
Leveraging Organizational Assets
1. Information Systems
Information systems are essential as they help to gather, systematize, and present information in a format that facilitates decision-making. Implementing robust information systems can automate routine tasks, like portfolio analysis and reporting.
2. Subject-Matter Experts (SMEs)
SMEs provide specialized knowledge and input, which can significantly influence portfolio decisions. They can offer insights based on their experience, contributing to the success of the portfolio management process.
Industry Standards
Industry standards provide a benchmark for portfolio management practices. They summarize concepts, terms, and activities that are considered best practices across the industry. An example of an industry standard is the ISO 21500:2012, which provides guidance on project portfolio management.
Incorporating Best Practices
Let’s now discuss some practical ways to incorporate these factors into your portfolio management.
- Aligning Portfolio With Strategy: Projects in the portfolio should be actively managed to ensure they align with the organization’s strategic goals. Regular review meetings can ensure alignment is maintained.
- Balancing Risk and Return: A well-structured portfolio will have a balance of risk and return. High-risk projects should be balanced with low-risk ones. Risk assessments should be carried out routinely, and risk mitigation plans should be in place.
- Stakeholder Engagement: Regular communication with stakeholders is essential to align expectations and to obtain their buy-in.
- Implementing an Effective Governance Framework: A governance framework lays down roles and responsibilities, decision-making processes, etc. This will help guide the portfolio management process.
- Continuous Improvement: Utilize feedback and lessons learned from completed projects to continuously improve portfolio management practices.
To Summarize, portfolio management is complex and requires well-defined standards, protocols, and rules, along with best practices to ensure effective management. Utilizing organizational assets and sticking to industry standards can help ensure consistent portfolio management practices.
Answer the Questions in Comment Section
True or False: Portfolio management standards, protocols, and rules are not crucial for establishing consistent portfolio management practices.
- False
Answer: False
Explanation: Portfolio management standards, protocols, and rules are fundamental to establishing a uniform approach to portfolio management. They provide guidance on how to manage a portfolio effectively and efficiently.
The following are essential assets when determining portfolio management standards except:
- a) Information Systems
- b) Cash Reserves
- c) Subject Matter Experts
- d) Industry Standards
Answer: b) Cash Reserves
Explanation: Cash reserves are financial assets but not necessarily beneficial in establishing portfolio management standards. Information systems, subject matter experts and industry standards play very pivotal roles in determining portfolio management standards.
True or False: The process of establishing portfolio management practices cannot be influenced by organizational assets.
- False
Answer: False
Explanation: Organizational assets such as information systems and subject matter experts are vital in establishing consistent portfolio management practices because they provide the necessary information and expertise.
What role does ‘Subject Matter Expert’ play in establishing portfolio management standards?
- a) Provide financial support
- b) Share relevant knowledge and expertise
- c) Create information systems
- d) Set industry standards
Answer: b) Share relevant knowledge and expertise
Explanation: Subject Matter Experts share their knowledge and expertise about portfolio management, which helps in setting fundamental standards, protocols, and rules.
Multiple Select: Components required to establish consistent portfolio management practices include:
- a) Portfolio Management Standards
- b) Organizational Politics
- c) Protocols and Rules
- d) Organizational Assets
Answer: a) Portfolio Management Standards, c) Protocols and Rules, d) Organizational Assets
Explanation: Portfolio management standards, protocols and rules, and organizational assets like information systems are integral part of established portfolio management practices. Organizational politics usually doesn’t contribute to this objective directly.
True or False: Industry standards play a pivotal role in determining portfolio management standards.
- True
Answer: True
Explanation: Industry standards set the benchmark for portfolio management practices and contribute to determining the standards for portfolio management.
Multiple Select: Information systems contribute to effective portfolio management by:
- a) Assisting in risk assessment
- b) Facilitating decision making
- c) Storing and organizing data
- d) Distributing dividends
Answer: a) Assisting in risk assessment, b) Facilitating decision making, c) Storing and organizing data
Explanation: Information systems contribute to effective portfolio management by assisting in risk assessment, facilitating decision making and organizing data. Distributing dividends is a financial operation, not an information system’s function.
Which is not a benefit of establishing consistent portfolio management practices?
- a) Improved decision making
- b) Increased portfolio value
- c) Reduced need for experts
- d) Enhanced risk assessment
Answer: c) Reduced need for experts
Explanation: Establishing consistent portfolio management practices improves decision making, increases portfolio value and enhances risk assessment; it doesn’t reduce the need for experts. On contrary, experts are integral part of setting these practices.
Multiple Select: Portfolio Management Professional (PfMP) exam is likely to test knowledge and understanding about:
- a) Portfolio Management Standards
- b) Industry Standards
- c) Personal Financial Management
- d) Organizational Assets
Answer: a) Portfolio Management Standards, b) Industry Standards, d) Organizational Assets
Explanation: The PfMP exam tests the knowledge on establishing portfolio management using standards, industry standards and organizational assets. It doesn’t test personal financial management knowledge.
True or False: The process of establishing portfolio management practices is standardized and identical across all organizations.
- False
Answer: False
Explanation: While there are common principles and best practices, the process of establishing portfolio management practices can vary across organizations based on their specific needs, assets, and requirements.
This blog post on establishing consistent portfolio management practices is fantastic. The emphasis on using organizational assets and industry standards is spot on.
Agreed! Leveraging information systems to enhance portfolio management practices is vital. Does anyone have any specific tools they recommend?
Thanks for the insights on incorporating subject matter experts in portfolio management. How do you ensure their input is systematically integrated?
I appreciate this blog post! It’s a great read for someone preparing for the PfMP exam.
Using industry standards like PMI’s PMBOK for establishing protocols is indeed necessary. Does anyone have experience blending multiple standards in one organization?
Great article. I completely agree with the need for consistent practices to manage portfolios efficiently.
Incorporating best practices from industry leaders can be very impactful. Any suggestions on where to find comprehensive best practice guides?
Thanks for the detailed post. It’s very helpful!