PFMP · Question #648
The members of your Portfolio Review Board and other key stakeholders tend to be risk adverse as the company has survived recent recessions and is profitable. However, in an upcoming meeting with…
The correct answer is B. The probability of achieving portfolio objectives. The question describes a probabilistic cost analysis showing the likelihood that the portfolio will meet specific cost targets at defined confidence levels (e.g., 75% confidence of meeting a $41,000 target requires a $50,000 forecast). This is a representation of the…
Question
The members of your Portfolio Review Board and other key stakeholders tend to be risk adverse as the company has survived recent recessions and is profitable. However, in an upcoming meeting with the corporate Board of Directors, they have asked you to show the frequency of meeting certain cost objectives at various percent points. For example assume the portfolio is to meet a $41,000 target in the next month, to be 75% confident this will occur, a forecast of $50,000 is needed. This means you need to show:
Options
- AThe needed contingency reserve
- BThe probability of achieving portfolio objectives
- CThe confidence of meeting success criteria
- DThe values of KPIs with their confidence levels
How the community answered
(36 responses)- A3% (1)
- B83% (30)
- C8% (3)
- D6% (2)
Explanation
The question describes a probabilistic cost analysis showing the likelihood that the portfolio will meet specific cost targets at defined confidence levels (e.g., 75% confidence of meeting a $41,000 target requires a $50,000 forecast). This is a representation of the probability of achieving portfolio objectives-specifically cost objectives. It is not simply a contingency reserve calculation (A), which produces a single number. It is not solely about success criteria confidence (C) or KPI values (D); those are related concepts but do not specifically describe the frequency-distribution, confidence-interval output being requested by the Board.
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