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PFMP · Question #109

A portfolio manager is having a status meeting with the various program managers within the portfolio. One of the program managers mentions a new risk that may impact a deliverable. While it has a…

The correct answer is C. escalate new portfolio risks to the steering committee in accordance with the risk management. A risk with low probability but severe portfolio-level impact - nearly doubling program costs - must be escalated to the steering committee per the risk management plan, regardless of its likelihood.

Governance

Question

A portfolio manager is having a status meeting with the various program managers within the portfolio. One of the program managers mentions a new risk that may impact a deliverable. While it has a low probability, the risk would nearly double the program's costs and affect the overall portfolio if it occurred. The best course of action for the portfolio manager to take is to:

Options

  • Aadvise the program manager to manage low probability risks within the program and escalate
  • Bensure contingency reserves are allocated and application approaches are developed.
  • Cescalate new portfolio risks to the steering committee in accordance with the risk management
  • Dperform a risk assessment with subject matter experts to understand the risk's impact.

How the community answered

(29 responses)
  • A
    3% (1)
  • B
    3% (1)
  • C
    83% (24)
  • D
    10% (3)

Why each option

A risk with low probability but severe portfolio-level impact - nearly doubling program costs - must be escalated to the steering committee per the risk management plan, regardless of its likelihood.

Aadvise the program manager to manage low probability risks within the program and escalate

Advising the program manager to manage the risk within the program is inappropriate because the risk's potential impact extends beyond the program to the overall portfolio, classifying it as a portfolio-level risk requiring portfolio-level governance.

Bensure contingency reserves are allocated and application approaches are developed.

Allocating contingency reserves and developing response approaches are valid risk response activities but are premature before the risk has been properly assessed and escalated to the correct decision-making authority.

Cescalate new portfolio risks to the steering committee in accordance with the risk managementCorrect

The risk management plan defines escalation thresholds based on impact, not probability alone. A risk that could nearly double a program's costs and affect the overall portfolio clearly exceeds program-level boundaries and meets the threshold for steering committee review, making escalation the appropriate and required action per the established risk governance process.

Dperform a risk assessment with subject matter experts to understand the risk's impact.

Performing a risk assessment with subject matter experts may add value later, but escalating the risk per the risk management plan is the best immediate action given its confirmed portfolio-level impact.

Concept tested: Portfolio risk escalation per risk management plan

Source: https://www.pmi.org/pmbok-guide-standards/foundational/standard-for-portfolio-management

Topics

#Portfolio Risk Management#Portfolio Governance#Risk Escalation#Strategic Decision-Making

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