Introduction to Portfolio Management

The art of selecting the right investment policy for an organization/individual in terms of minimum risk and maximum return is called as portfolio management. Portfolio management consists of three main elements: investing time horizon, diversification of investments, and risk tolerance.

Project portfolio management (PPM) is the centralized management of an organization’s projects. While these projects may or may not be related to one another, they are managed under one umbrella, called a portfolio, in order to provide oversight and manage any competing resources. Portfolio management in project management also involves the intake process of projects. This includes identifying potential projects, authorizing them, assigning project managers to them, and including them into the overall portfolio. It also includes high-level controls and monitoring of projects to ensure the ongoing projects are directly related to the overall goals and strategies of the business.

Why project portfolio management is important

According to the Project Management Institute, “Our research has shown that portfolio management is a way to bridge the gap between strategy and implementation. In other words, it is the job of the portfolio manager to ensure the right projects are being done at the right time, to maximize the company’s investment. This is particularly important in an organization with a lot of internal projects. Ideas for projects can come from anywhere, at any time, and it’s common for a business to have a long list of potential projects to complete. However, there usually is not enough time, money, or resources to do them all right away. Portfolio management is necessary to understand which ones will have the largest beneficial impact on the company and prioritize the projects accordingly.

Benefits of project portfolio management

  • It provides alignment between company objectives and projects.
  • It takes personal bias out of project planning, so there are no “pet” projects.
  • It makes decision-making easier around project conflicts.
  • It helps the project management office or portfolio manager turn down projects that they are not aligned with business priorities.
  • It emphasizes the importance of focusing on the long-term, big picture.
  • It builds governance and oversight into the management of projects.

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