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Re-Assessing Portfolio Optimization & Strategic Initiative Evaluation

Portfolio optimization is more critical than ever before. Globally, organizations have radically re-thought all aspects of operations, including relationships with employees, customers, suppliers, third parties, and other stakeholders.

In many quarters, the impact of change is still being absorbed and understood.  The timeframe and extent to which the business climate will return to “normal” are unknown.  Such uncertainty means the frameworks for portfolio assessment and management appropriate in the early months of 2020 have become unmoored from current conditions.

Projects, programs and portfolios must be examined through a fresh lens and optimized for many new scenarios that address the current operating environment.  Depending on circumstances, several vectors that may become important to understand include:

  • Concentration on projects with benefits that drive cost savings or cost avoidance, given that assumptions underlying revenue increases have become much more speculative in many cases.
  • Preservation of capital that shifts the emphasis towards a cash flow perspective and away from a balance sheet/P&L standpoint.
  • Focus on projects with ongoing run costs that are contained and highly reliable throughout the associated value period, lowering the financial risk associated with an uncertain future.

Portfolio managers should consider other essential frameworks for re-balancing in response to a level of disruption unimaginable at the start of 2020.

Assessing Strategic Alignment & Objectively Defining Prioritization

Many organizations have found it necessary to re-think strategic objectives for reasons ranging from radical changes in market outlook to emphasis on existing channels and customer retention.

Portfolio managers have a tremendous opportunity to add significant value by incorporating the organization’s re-imagined strategic goals and objectives into a framework for collaboration with initiative owners.  Project sponsors can assess how initiatives align with new frameworks resulting from significant changes due to dramatic shifts in the market.  Some programs will have fallen out of alignment due to fundamental changes in strategy, while others may find greater alignment with a higher number of or more important new goals.

Objective re-alignment of all projects provides a compelling scenario for portfolio re-balancing efforts.

Independent from alignment, it is also critical to understand how shifting sands impact prioritization.  A useful assessment rubric combines strategic value and the ability to execute (risk assessment), allowing the plotting of projects across a quadrant layout.  This approach provides the portfolio manager with a powerful visualization tool that independently validates projects that should be prioritized compared with scenario-based portfolio analysis.

Together, these tools provide the portfolio manager with a means to play a transformative role in management efforts to understand how to optimize investment decisions in light of dramatic changes to the overall global business environment.

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