governance and risk –
it’s all about the stakeholder
nothing can be said to be certain, except death and taxes.
governance and risk – it’s all about the
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
Investing in a project is similar; there is no such thing as a
‘risk free’ project and the art of portfolio
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
register’, the overall project risk and the balancing effect
holding a portfolio of risks. It will then briefly outline the function
of governance, best defined as ‘the system by which entities
directed and controlled’. The governing body represents the
interests of the organizations ‘owners’ and is
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
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
thereby ensuring the long term success of the organization.