Risk Management in Portfolios, Programs, and Projects: A Practice Guide by PMI, Project Management Institute;

Table of Contents
Introduction..................................................................................................................... 1
Purpose of This Practice Guide......................................................................................................................................... 2
Approach of This Practice Guide......................................................................................................................................... 2
Audience for This Practice Guide......................................................................................................................................... 3
Principles of Risk Management......................................................................................................................................... 3
Strive to Achieve Excellence in the Practice of Risk Management............................................................................................................................. 3
Align Risk Management with Organizational Strategy, Governance Practices, and Project Management Performance Domains.......................................................................................................................... 4
Focus on the Higher Risk Value............................................................................................................................. 4
Optimize Risk Responses to Focus on Value Realization............................................................................................................................. 4
Foster a Culture That Embraces Risk Management............................................................................................................................. 5
Navigate Complexity Using Risk Management to Enable Successful Outcomes
and Value Realization............................................................................................................................. 5
Continuously Improve Risk Management Competencies............................................................................................................................. 5
Structure of This Practice Guide......................................................................................................................................... 6
ContextandKeyConceptsofRiskManagement..................................................................................................................... 7
Key Concepts and Definitions......................................................................................................................................... 7
Risk............................................................................................................................. 7
Risk Attitude............................................................................................................................. 9
Risk Appetite.......................................................................................................................... 10
Risk Threshold.......................................................................................................................... 11
Uncertainty.......................................................................................................................... 12
Risk Management in Organizations....................................................................................................................................... 12
Risk Management at Different Organizational Levels....................................................................................................................................... 13
Enterprise.......................................................................................................................... 13
Portfolio.......................................................................................................................... 15
Program.......................................................................................................................... 16
Project.......................................................................................................................... 17
Key Success Factors....................................................................................................................................... 17
FrameworkforRiskManagementinPortfolio,Program,andProjectManagement................................................................................................................... 21
Business Context of Risk Management in Portfolio, Program, and Project Management....................................................................................................................................... 21
Organizational Framework.......................................................................................................................... 22
Organizational Context.......................................................................................................................... 24
Strategic and Organizational Planning.......................................................................................................................... 24
Linking Planning with Execution through Portfolio, Program, and
Project Management.......................................................................................................................... 24
Scope of Accountability, Responsibility, and Authority....................................................................................................................................... 25
Accountability at the Enterprise Level.......................................................................................................................... 25
Accountability at the Portfolio Level.......................................................................................................................... 26
Accountability at the Program Level.......................................................................................................................... 26
Accountability at the Project Level.......................................................................................................................... 27
General Approaches to Risk Management....................................................................................................................................... 28
Factors for Evaluating Risk.......................................................................................................................... 29
Responding to Risks.......................................................................................................................... 30

RiskManagementLifeCycleinPortfolio,Program,andProjectManagement.... 33
Introduction to the Risk Management Life Cycle......................................................... 33
Case Study: Introduction to the Compact Wind Turbine Project.............................. 35
Risk Management in Adaptive, Predictive, and Hybrid Project Management.................................................................................................................................... 36
Integrating Project Risk Management and Organizational Risk Management.................................................................................................................................... 38
Risk Escalation........................................................................................................... 41
Case Study: Risk Escalation in the Compact Wind Turbine Project........................... 42
Organizational Project Management and Its Application in Risk Management............................................................................................................. 42
Plan Risk Management......................................................................................................... 44
Purpose of Plan Risk Management....................................................................... 44
Case Study: Tailoring and Scaling the Risk Management Plan in the
Compact Wind Turbine Project............................................................................... 46
Key Success Factors for Plan Risk Management.................................................. 46
Case Study: Planning Risk Management in the Compact Wind Turbine Project... 47
Identify Risks......................................................................................................................... 47
Purpose of Identify Risks....................................................................................... 48
Key Success Factors for Identify Risks................................................................. 48
Case  Study: Identifying Risks in the Compact Wind Turbine Project..................... 50
Perform Qualitative Risk Analysis..................................................................................... 50
Purpose of Perform Qualitative Risk Analysis.................................................... 50
Key Success Factors for Perform Qualitative Risk Analysis.............................. 51
Perform Quantitative Risk Analysis................................................................................... 51
Purpose of Perform Quantitative Risk Analysis................................................. 51
Key Success Factors for Perform Quantitative Risk Analysis........................... 52
Plan Risk Responses............................................................................................................. 52
Case Study: Responses to Threats in the Compact Wind Turbine Project............... 53
Case Study: Responses to Opportunities in the Compact Wind Turbine Project.. 55
Purpose of Plan Risk Responses............................................................................ 57
Key Success Factors for Plan Risk Responses..................................................... 57
Case Study: Planning Risk Responses in the Compact Wind Turbine Project......... 58
Implement Risk Responses................................................................................................. 59
Purpose of Implement Risk Responses............................................................... 59
Key Success Factors for Implement Risk Responses......................................... 59
Case Study: Implementing Risk Responses in the Compact Wind Turbine Project 60
Monitor Risks........................................................................................................................ 60
Purpose of Monitor Risks....................................................................................... 61
Key Success Factors for Monitor Risks................................................................ 61
Case Study: Monitoring Risks in the Compact Wind Turbine Project....................... 62
RiskManagementintheContextofPortfolioManagement............................... 63
Interconnectedness of Risks in Portfolios, Programs, and Projects........................... 63
Risk Efficiency and Risk-Return Trade-Offs........................................................ 63
Case Study: Portfolio Management in the Context of the Compact Wind Turbine Project.................................................................................................................................... 63
Risk Exposure in Portfolios.................................................................................... 64
Role of Portfolio Manager....................................................................................... 64
Risk-Efficient Boundary and Organizational Strategy...................................... 64
Case Study: The Risk-Efficient Boundary in the Compact Wind Turbine Project.... 65
Emerging Trends in Portfolio Risk Management................................................ 65
Case Study: Incorporating Emerging Trends in the Compact Wind Turbine Project................................................................................................................................................. 66

Portfolio Risk Management Life Cycle.................................................................. 67
Portfolio Risk Identification........................................................................... 67
Case Study: Strategic-Level Portfolio Risks in the Compact Wind Turbine Project.......................................................................................................................... 68
Portfolio Risk Qualitative and Quantitative Analyses............................. 68
Case Study: Portfolio Risk Analyses in the Compact Wind Turbine Project.. 69
Portfolio Risk Response Strategies............................................................. 69
Implementing Portfolio Risk Responses................................................... 70
Monitoring Portfolio Risks.......................................................................... 70
Integration of Risk Management into the Portfolio Management Performance Domains.............................................................................................. 70
RiskManagementintheContextofProgramManagement....................... 73
Distinctions and Challenges in Program Risk Management.............................. 73
Understanding Program Risk Management.............................................. 73
Sources, Nature, and Types of Program Risks.......................................... 73
Bridging the Risk Management Gaps among the Portfolio, Program, and
Project Levels.................................................................................................. 74
Managing Program Overall and Individual Risks................................... 76
Achieving Flexibility and Resilience in Program Risk Management.... 76
Program Risk Management Implementation Challenges..................... 77
Program Risk Management Life Cycle.................................................................. 80
Program Risk Identification........................................................................... 80
Case Study: Program Management in the Context of the Compact Wind Turbine Project........................................................................................................... 80
Program Risk Qualitative and Quantitative Analyses............................. 81
Case Study: Program Risk Analyses in the Compact Wind Turbine Project... 82
Program Risk Response Strategies............................................................. 83
Case Study: Program Risk Response Strategies in the Compact Wind Turbine Project.......................................................................................................................... 83
Implementing Program Risk Responses................................................... 84
Monitoring Program Risks........................................................................... 84
Case Study: Monitoring Program Risks in the Compact Wind Turbine Project....................................................................................................................................... 85
Integration of Risk Management into the Program Management Performance Domains.............................................................................................. 85
Strategic Alignment....................................................................................... 85
Benefits Management.................................................................................. 86
Stakeholder Engagement............................................................................ 86
Governance Framework............................................................................... 87
Collaboration.................................................................................................. 87
Life Cycle Management.................................................................................. 88
Case Study: Program Management Performance Domains in the
Compact Wind Turbine Project..................................................................... 88
Program Activities............................................................................................ 90
Case Study: Program Activities in the Compact Wind Turbine Project.......... 90
RiskManagementintheContextofProjectManagement.......................... 91
Risk Management Gaps among the Project and Higher Levels...................... 91
Establishing Risk Thresholds....................................................................... 91
Addressing Risks from Higher and Strategic Levels............................... 92
Project-Level Risk Interfaces with Operations......................................... 92
Project Risk Management Life Cycle..................................................................... 92
Enhancing Risk Analysis and Involving the Right Participants............. 92
Case Study: Project Management in the Context of the Compact Wind Turbine Project........................................................................................................... 93

Project Risk Identification........................................................................................ 93
Case Study: Project Risk Identification in the Compact Wind Turbine Project....... 95
Project Risk Qualitative and Quantitative Analyses.......................................... 96
Case Study: Project Risk Analyses in the Compact Wind Turbine Project............... 96
Project Risk Response Strategies.......................................................................... 97
Case Study: Project Risk Response Strategies in the Compact Wind Turbine Project................................................................................................................................................. 97
Implementing Project Risk Responses................................................................ 97
Case Study: Implementing Project Risk Responses in the Compact Wind Turbine Project.................................................................................................................................... 97
Monitoring Project Risk......................................................................................... 98
Case Study: Monitoring Project Risk in the Compact Wind Turbine Project........... 98
Integration of Risk Management into Project Management Processes................... 99
Initiating Processes................................................................................................. 99
Planning Processes................................................................................................. 99
Executing Processes............................................................................................. 100
Monitoring and Controlling Processes............................................................. 100
Closing Processes.................................................................................................. 100
Case Study: Integration of Risk Management into the Project Management
Processes in the Compact Wind Turbine Project............................................... 100
Project Risk Management Controls............................................................................... 102
References........................................................................................................... 103
AppendixX1ContributorsandReviewersofRiskManagementinPortfolios,
Programs, and Projects: A Practice Guide............................................................... 105
X1.1 Contributors..................................................................................................................... 105
X1.2 PMI Team Members......................................................................................................... 107
AppendixX2TechniquesfortheRiskManagementFramework........................... 109
X2.1  Risk Management Planning........................................................................................... 109
X2.2  Identify Risks.................................................................................................................... 110
X2.2.1    Assumptions and Constraints Analysis...................................................... 111
X2.2.2    Brainstorming................................................................................................... 112
X2.2.3    Cause and Effect (Ishikawa) Diagrams........................................................ 112
X2.2.4    Checklists.......................................................................................................... 112
X2.2.5    Delphi Technique............................................................................................ 113
X2.2.6    Document Review.......................................................................................... 113
X2.2.7    Expert Judgment.............................................................................................. 113
X2.2.8    Facilitation......................................................................................................... 113
X2.2.9    Historical Information..................................................................................... 114
X2.2.10 Interviews......................................................................................................... 114
X2.2.11 Prompt Lists..................................................................................................... 114
X2.2.12 Questionnaires................................................................................................. 114
X2.2.13 Root Cause Analysis........................................................................................ 115
X2.2.14 SWOT Analysis.................................................................................................. 115
X2.2.15 Premortem....................................................................................................... 116
X2.3  Qualitative Risk Analysis................................................................................................. 116
X2.3.1    Affinity Diagrams............................................................................................. 116
X2.3.2    Analytic Hierarchy Process........................................................................... 116
X2.3.3    Influence Diagrams......................................................................................... 117