Managing Risk in Portfolios

Known globally as The Risk Doctor, David has been working in risk management for about 30 years. He has worked in 48 countries on every continent except the Antarctic (too cold!), with clients in most industries.

  Portfolio Management   Risk Management   ProjectsAtWork  

Managing risk at the portfolio level requires a balanced approach and the exercise of judgement, both when we create the portfolio and as we execute the projects within it. Here are some fundamental steps and key principles.

Many organizations choose to run groups of related projects as a portfolio, aiming to create synergies and savings by managing them together. Risk is one of the most important aspects that must be managed at the portfolio level. But it is clear that risk is not simply additive, and we cannot determine the level of portfolio risk exposure just by adding up all the risk exposures of the projects. So how do we assess and manage the risk associated with a portfolio of projects?

This is important when we initially establish the portfolio, when we need to be sure that the overall level of risk exposure is acceptable. But we must also assess and manage the changing and emergent risk exposure as we execute the projects within our portfolio, to be sure that they stay within our risk tolerance.

To assess risk exposure when we are building a portfolio of projects, the first challenge is to clearly define the objectives of the portfolio. Then we need to define risk thresholds against each objective, to reflect the risk appetite of the main stakeholders.

The next step is to list the candidate projects for possible inclusion in the portfolio. At this …

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