The Standard for Portfolio Management

1 THE Standard FORFOURTH EDITIONPORTFOLIO MANAGEMENTANSI/PMI08-003-2017 The Standard for Portfolio MANAGEMENTF ourth EditionThe Standard for Portfolio Management Fourth EditionIn today s environment of rapid change and constant disruption, highly mature Portfolio Management practices have proven to be a vital tool to organizational managers oversee a collection of projects, programs and other activities that are grouped together to meet strategic business objectives. The practice of Portfolio Management is integral to the implementation of your organization s overall strategic plan. Now in its fourth edition, The Standard for Portfolio Management reflects current practices and has been updated to reflect the evolution of the is a principle-based Standard , making it applicable to a broad range of organizations, regardless of project delivery Fourth Edition describes Portfolio Management and its relationship to organizational project Management , organizational strategy and the organization in addition to its relationship to program and project Management .

2 Not only is The Standard for Portfolio Management Fourth Edition invaluable for Portfolio managers and aspiring Portfolio managers, it s an important reference for anyone who works with portfolios from project and program managers to project stakeholders and senior managers. ISBN: 978-1-62825-197-5 $ GLOBALSTANDARDP roject Management InstituteGlobal Operations Center14 Campus BlvdNewtown Square, PA 19073 USATel: +1 610 356 GLOBAL 110/10/17 2:13 PMThe Standard for Portfolio MANAGEMENTF ourth EditionISBN: 978-162825-197-5 Published by:Project Management Institute, Campus BoulevardNewtown Square, Pennsylvania 19073-3299 USAP hone: +610 356 4600 Fax: +610 356 4647 Email: 2017 Project Management Institute, Inc. All rights Management Institute, Inc. content is copyright protected by intellectual property law that is recognized by most countries. To republish or reproduce PMI s content, you must obtain our permission.

3 Please go to for place a Trade Order or for pricing information, please contact Independent Publishers Group:Independent Publishers GroupOrder Department814 North Franklin StreetChicago, IL 60610 USAP hone: +1 800 888 4741 Fax: +312 337 5985 Email: (For orders only)For all other inquiries, please contact the PMI Book Service Book Service Box 932683, Atlanta, GA 31193-2683 USAP hone: +1 866 276 4764 (within the or Canada) or +1 770 280 4129 (globally)Fax: +1 770 280 4113 Email: of Congress Cataloging-in-Publication Data has been applied in the United States of America. No part of this work may be reproduced or transmitted in any form or by any means, electronic, manual, photocopying, recording, or by any information storage and retrieval system, without prior written permission of the paper used in this book complies with the Permanent Paper Standard issued by the National Information standards Organization ( 1984).

4 PMI, the PMI logo, PMBOK, OPM3, PMP, CAPM, PgMP, PfMP, PMI-RMP, PMI-SP, PMI-ACP, PMI-PBA, PROJECT Management JOURNAL, PM NETWORK, PMI TODAY, PULSE OF THE PROFESSION and the slogan MAKING PROJECT Management INDISPENSABLE FOR BUSINESS RESULTS. are all marks of Project Management Institute, Inc. For a comprehensive list of PMI trademarks, contact the PMI Legal Department. All other trademarks, service marks, trade names, trade dress, product names and logos appearing herein are the property of their respective owners. Any rights not expressly granted herein are 9 8 7 6 5 4 3 2 1 IIITAbLE OF CONTENTS1. INTROduCTION .. Purpose of The Standard for Portfolio Management .. Audience for The Standard for Portfolio Management .. What Is a Portfolio ? .. Relationships Among Portfolios, Programs, Projects, and What Is Portfolio Management ? .. Relationships Among Portfolio Management , Program Management , and Project Management .

5 Principles of Portfolio Management .. Relationships Among Portfolio Management , Organizational Strategy, Strategic business Execution, and Organizational Project Management .. Portfolio Management and Organizational Strategy .. Strategic business Execution and Organizational Project Management .. Portfolio Components and Their Interrelationships .. Program Management .. Project Management .. Operations Management .. Role of the Portfolio Manager .. Other Roles in Portfolio Management .. Sponsors .. Portfolio Governance body .. Portfolio , Program, and/or Project Management Office .. Program Managers .. Project Managers ..19IV Table of Contents2. THE Portfolio LIFE CYCLE .. Overview .. Guiding Principles .. Ongoing Life Cycle .. Initiation .. Planning .. Execution .. Optimization .. Monitor and Control .. Portfolio Management Information System (PMIS) .. Governance Within the Portfolio Life Cycle.

6 273. Portfolio STRATEGIC Management .. Overview .. Guiding Principles .. Portfolio Strategic Objectives .. developing Portfolio Strategic Objectives .. Vision and Mission Statements .. Strategic Goals .. Strategic Objectives .. Strategic Initiatives .. Strategic Risk Appetite .. Portfolio Charter .. Portfolio Roadmap .. Key Portfolio Components .. Evaluating Portfolio Key Components .. Selecting Portfolio Key Components .. Portfolio Optimization .. Managing Strategic Alignment .. Considerations When Managing Strategic Impact .. The Impact of Strategic Change ..41V4. Portfolio GOVERNANCE .. Overview .. What Is Portfolio Governance? .. Guiding Principles .. The Concept of Governance .. Portfolio Governance Impact on Programs and Projects .. Portfolio Governance and Other domains in Portfolio Management .. Effective Portfolio Governance design Factors .. Portfolio Governance Roles .. Portfolio Sponsor.

7 Portfolio Governance board .. Portfolio Audit Organization .. Other Roles ..505. Portfolio CAPACITY ANd CAPAbILITY Management .. Overview .. Guiding Principles .. Capacity Management .. Capacity Planning .. Supply and demand Management .. Supply and demand Analysis .. Supply and demand Allocations .. Supply and demand Organizational Capabilities .. Capability Assessment .. Capability development .. developing New Capabilities .. Sustaining Existing Capabilities .. Performance Reporting and Analytics .. balance Capacity and Capability ..61VI Table of Contents6. Portfolio STAKEHOLdER ENGAGEMENT .. Overview .. Guiding Principles .. definition and Identification of Portfolio Stakeholders .. Categorization of Stakeholders .. Identifying Stakeholders .. Analysis of Portfolio Stakeholders .. Stakeholder Engagement Planning .. Identifying Communications Management Approaches .. Alignment with Governance.

8 Communication Infrastructure .. Portfolio Management Plan .. Portfolio Reports .. Portfolio Process Assets .. Communication Governance and Interface to Components .. Manage Portfolio Communications ..737. Portfolio VALuE Management .. Overview .. Guiding Principles .. What Is Value Management ? .. Components of Value Management .. Negotiating Expected Value .. Maximizing Value .. Assuring Value .. Realizing Value .. Measuring Value .. Reporting Value ..84 VII8. Portfolio RISK Management .. Overview .. Guiding Principles .. Managing Portfolio Risk .. balancing Risk .. Portfolio Risk Management .. Key Planning Elements .. Portfolio Risk Management Framework .. Risk Perception .. Portfolio Risk Management Framework and Portfolio Risk Management Plan .. Portfolio Risk Management Framework .. Portfolio Risk Management Plan ..95 REFERENCES ..97 APPENdIX X1 FOuRTH EdITION CHANGES .. Structural Changes.

9 Writing Styles .. Section 1 Introduction Changes .. Section 2 The Portfolio Life Cycle .. Section 3 Portfolio Strategic Management .. Section 4 Portfolio Governance .. Section 5 Portfolio Capacity and Capability Management .. Section 6 Portfolio Stakeholder Management .. Section 7 Portfolio Value Management .. Section 8 Portfolio Risk Management ..104 VIII Table of ContentsAPPENdIX X2 CONTRIbuTORS ANd REVIEWERS OF THE Standard FOR Portfolio Management .. The Standard for Portfolio Management Fourth Edition Core Committee .. Subcommittee Members .. Reviewers .. SME Review .. Consensus body Review .. Exposure draft Review .. PMI standards Program Member Advisory Group (MAG) .. Harmonization Team .. Production Staff ..110 APPENdIX X3 CONSIdERING THE Portfolio AS A COMPLEX SYSTEM .. A Holistic Approach to Portfolios and Their Management ..111 GLOSSARY ..115 INdEX ..121 IXLIST OF TAbLES ANd FIGuRESF igure 1-1.

10 Portfolios, Programs, and Projects High-Level View ..4 Figure 1-2. The Organizational Context of Portfolio Management ..8 Figure 1-3. Portfolio Management Performance domains ..10 Figure 2-1. Information and decision Flows Within the Portfolio Life Cycle (Example) ..22 Figure 2-2. Example of Portfolio Life Cycle Major Activities ..23 Figure 3-1. Example of Portfolio Roadmap ..36 Figure 4-1. Governance Hierarchy, Including Principles and Objectives ..45 Figure 5-1. Capacity and Capability Management Components of Portfolio Management .. 53 Figure 5-2. The Relationship between Supply (Capacity) and demand ..56 Figure 7-1. Key Activities in Portfolio Value 78 Figure 7-2. The Link between Strategy and Portfolio Performance via Component deliverable ..81 Figure 7-3. Value Realization Chain ..83 Figure 8-1. Elements of Portfolio Risk Management ..90 Figure 8-2. An Example of Risk Categorization ..94X Table of ContentsTable 1-1.