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Portfolio governance and risk –
it’s all about the stakeholder

In this world nothing can be said to be certain, except death and taxes.
Benjamin Franklin

Keywords: Governance, Risk. 

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Portfolio governance and risk – it’s all about the stakeholder   [P178]

Risk is subjective! Some people think it is fun to jump out of perfectly good working aircraft and parachute to earth, others of us prefer our flying to be accompanied by a nicely served gin and tonic.  Different people have different perspectives on the risks they are prepared to take, and the rewards they anticipate as a consequence of their flight.

Investing in a project is similar; there is no such thing as a ‘risk free’ project and the art of portfolio management is to balance the risks and rewards of investing in projects, whilst keeping the overall risk exposure at a level that is acceptable to the key stakeholders, and still generate the expected rewards. This is a difficult balancing act.

To set the framework for the main discussion, this paper will briefly outline the three levels of risk, individual risks in the ‘risk register’, the overall project risk and the balancing effect of holding a portfolio of risks. It will then briefly outline the function of governance, best defined as ‘the system by which entities are directed and controlled’. The governing body represents the interests of the organizations ‘owners’ and is responsible for the governance system which defines the parameters within which management are expected to operate.

Within this framework the function of portfolio management as a risk optimizer will be discussed. Investing in the right projects for the right reasons to generate acceptable returns is subjective, and is determined by stakeholder attitudes.  The paper will emphasize the importance of the portfolio management team investing their time in effective stakeholder communication to garner support for taking the ‘right risks’ to receive the ‘right rewards’, thereby ensuring the long term success of the organization
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Author:  Patrick Weaver


Presented at:
 

Encore presentation PGC Symposium, Canberra. May 2014

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