Identify existing and potential portfolio components by reviewing documentation such as business plans/proposals in order to create portfolio scenarios.

Existing portfolio components pertain to all ongoing or completed projects and programs within an organization that currently contribute to strategic objectives. Identifying them is crucial as it provides a foundation for further analysis and decision-making processes.

• Business Plans: Detailed business plans offer insights into the current projects and programs contributing to the organization’s strategic plans. One can identify these components by reviewing the target outcomes, Key Performance Indicators (KPIs), and other relevant details within the plan.
• Project Documentation: This includes project charters, plans, and progress documents. Scrutinizing these documents enables the portfolio manager to discern which projects or programs are ongoing, their stage, and how they contribute to the strategic goals.
• Program Documentation: Reviewing program plans, program improvement plans, benefits delivery reports, etc., allows the manager to determine which programs exist and contribute to the strategic objectives.

POTENTIAL PORTFOLIO COMPONENTS IDENTIFICATION

Potential portfolio components relate to the proposed projects and programs that might be initiated in the future to fulfill strategic goals. These components are discerned from:

• Business Proposals: These proposals typically recommend new projects or programs to meet emerging needs or tap into new opportunities. Detailed review and analysis help to identify these potential projects or programs.
• Business Case: It provides a justification for a proposed project or program, outlining the benefits, costs, risks, and feasibility. A thorough review enables the identification of potential components for the portfolio.
• Requests for Proposals (RFPs): The responses to RFPs can also include potential projects or programs to address specific needs or opportunities.

CREATION OF PORTFOLIO SCENARIOS

After identifying the existing and potential portfolio components, it’s essential to create portfolio scenarios. This is a strategic exercise to anticipate various circumstances and plan the portfolio accordingly.

1. Scenario Analysis: It involves creating different forecasts with an array of assumptions about the future business environment. Existing and potential components are included in different scenarios to explore their impact on the portfolio.
2. What-if Analysis: It is a form of scenario analysis where various dramatic changes are assumed in the business environment, and the impact on portfolio components is analyzed, e.g., financial market change, regulatory changes, etc.
3. Sensitivity Analysis: This helps the portfolio manager to understand which variables are most critical to the performance of a portfolio. By changing one variable at a time while keeping others constant, the manager can see the impact of that variable on the portfolio performance.

For example, suppose we have a software company that currently has ongoing projects A, B, C (existing portfolio components) and proposed projects D, E (potential portfolio components). The portfolio manager may create scenarios like:

• Scenario 1: Continue with projects A, B, C and start project D.
• Scenario 2: Continue with projects A, B, C and start project E.
• Scenario 3: Terminate project B, continue with projects A, C and start projects D, E.

These scenarios help the manager anticipate the impacts of different actions on strategic objectives, facilitating informed decision-making processes.

In conclusion, identification of existing and potential portfolio components through thorough documentation review, coupled with creating portfolio scenarios, allows portfolio managers to stay agile. It enables them to adapt, prepare, and steer the portfolio towards achieving strategic goals amid ever-changing business environments.