Portfolio management entails selecting, prioritizing, and controlling a company’s programs and projects to ensure they align with its strategic goals and are within its delivery capabilities. The objective is to maximize return on investment (ROI) through carefully balancing change implementation and continuing with business as usual.
Active portfolio managers adhere closely to market movements, economic indicators, political climate, and company-specific news. This information is used to schedule the buying and selling of investments to stay ahead of anomalies.
Here are some pros and cons of portfolio management.
Benefits of portfolio management
PPM’s many benefits range from the assessment of future projects and the prediction of risks to the alignment of business strategies. Below are some of these benefits.
Enhanced readability and accessibility
The achievement of project goals is dependent on their organization and exposure. The projects in your portfolio may be visually organized and tracked with the help of PPM software, which can also serve as a centralized hub for project updates.
Ease of distribution
When implementing PPM software, teams and supervisors may share information more efficiently. In addition, when everyone uses the same software version, there is less room for error.
Saves time
With portfolio management software, you can save time and money by automating routine processes and setting up regular reminders and status checks. In addition, since the program handles mundane chores, managers can focus on more strategic endeavors.
Help management make choices
The portfolio management process can be easily analyzed with the help of portfolio management software. Portfolio dashboards provide executives with a quick overview of the decisions, the reasoning behind those decisions, and the next steps to take. In addition, portfolio management software can create specialized reports for various uses. Reports that follow a regular format are simple to read and store for later use.
Pros of portfolio management
The value of effective portfolio management cannot be overstated. Below are a few pros of portfolio management
Inventory
It can be confusing to know where to look for what you need when so many different programs operate simultaneously. With portfolio management, all company members may see the same comprehensive image. At this step in the planning process, all parties are aware of what they are up against in the early stage of the project. When employees agree, businesses are more likely to move quickly on strategic projects and make decisions aligned with long-term goals.
Involvement
Portfolio management enables more in-depth participation across all sectors. Senior management is more likely to take notice of a portfolio, and their participation from the get-go improves the odds of success for all projects in the portfolio. Alignment of this sort also makes it much simpler to spot and fix performance problems.
Risk
When a project’s resources are pooled together in a portfolio, its likelihood of failure decreases. As a result, a corporation can take on more work and increase productivity by grouping related programs and assigning resources.
Cons of portfolio management
Despite PPM’s apparent simplicity, it has significant drawbacks. Some of the reasons why portfolio management might not be the best fit for your company are the ones listed below.
Resources
Shared program responsibility benefits project portfolio management in terms of resources, but it also presents challenges. Misappropriation of funds is possible if the wrong person is responsible for allocating funds. Resources must be allocated fairly and proportionally for portfolio management to be effective.
Definition
To effectively manage a project, one must be able to define and prioritize its elements. When a project’s tasks can be reduced to their bare essentials, it becomes much more manageable. Yet, things become more complicated to organize when the focus shifts to portfolio management.
Portfolio management will fail if stakeholders cannot settle on program priorities due to a lack of clarity over the scope of elements within the portfolio. The situation may become much more complicated as a result.
Size
The success of portfolio management may depend on the size of an organization. Organizing wastes time and money if a company is small or has few active initiatives. Portfolio management is required only when there is an opportunity for expansion, as measured by a more generalized management concept.
Conclusion
Before committing resources, it’s crucial to weigh the benefits and drawbacks of portfolio management to determine if it’s the best fit for your business. Management of a portfolio fosters participation from all levels of an organization, as it lowers the stakes and helps management keep track of stock more closely.