52 ◾ PfMP® Exam Practice Tests and Study Guide
Manage Portfolio Value
◾ Purpose
− Methods to express value
− Value measurement framework
− Change in expected value of components
− Recommending portfolio changes
◾ Inputs
− Roadmap
• Component delivery high- level timeline
− Portfolio management plan
• Identication and assessment of value
• Monitoring benet interdependencies
− Portfolio reports
• Aggregate component performance
• Variance reports
• Alert techniques
• Standardized formats
• Burn- down/ burn- up reports
• Trafc light reports
◾ Tools and Techniques
− Enabler for optimization and authorization
− Benet criteria examples
− Elicitation techniques
• Stakeholder meetings
• SWOT analysis for benets
− Value scoring and measurement analysis
• Scoring models—benets
• Revision of scoring weights
• Cost/ benet analysis for benets
• Comparative advantage analysis
• Progress measurement techniques—earned value
• Value measurement techniques
• Portfolio efcient frontier—Henry Markowitz, best possible level of
return for the level of risk
− Benet realization analysis
• Results chain—cause- and- effect relationships
• Outcome probability analysis of the portfolio and success criteria,
cumulative distribution
◾ Outputs
− Updates
• Portfolio management plan
• Portfolio reports
• Portfolio process assets
Portfolio Performance Management ◾ 53
Practice Questions
INSTRUCTIONS: Note the most suitable answer for each multiple- choice
question in the appropriate space on the answer sheet.
1. All portfolio decisions, including approvals, prioritizations, and artifacts such
as business cases, should be maintained. A best practice to follow is to:
a. Include them in the organization’s knowledge management system
b. Set up a portal dedicated to portfolio management
c. Include them as part of the portfolio management information system
d. Set up a document version control system
2. Entering a new market requires careful analysis to determine whether or not
it is protable to do so. Assume you are proposing to sponsor a new prod-
uct line for your company. You are recommending it to be part of the port-
folio. You have completed a market and competitor analysis. To ensure the
capacity is available, you decide to also:
a. Determine resource loading requirements
b. Assess available asset capacity
c. Use the Delphi approach to solicit views of experts
d. Prepare a histogram
3. With resources in short supply, especially with people with specialized skill
sets or the need for certain types of equipment, your resource management
software system ideally should have the capability to:
a. Use resource leveling
b. Use resource smoothing
c. Enable sharing of resource calendars
d. Show soft versus hard booking
4. Developing metrics for portfolio management takes time to ensure that the
portfolio manager has a preapproved set of metrics that include quantitative
and qualitative information. As well, the portfolio manager must aggregate
these metrics from the components in order that the stakeholders are not
overwhelmed by the metrics and can use them for informed decision mak-
ing This set of metrics should monitor a number of items including:
a. Benets
b. Value proposition
c. Customer relationship management
d. Risk prole
54 ◾ PfMP® Exam Practice Tests and Study Guide
5. There are a number of features that are common to portfolio components
regardless if one is working in a public sector or private sector organization.
You are managing the portfolio at your University and are explaining how it
is set up to a new member of the Board of Trustees. You explain that:
a. You have grouped the components in the portfolio so they can be man-
aged more effectively
b. The portfolio has been set up in a way that resources are allocated to
each project or program when it is part of the portfolio
c. The functional departments in the University basically are only involved
if they are pursuing new projects or programs such as redesigning how
the admissions process is handled
d. Each component in the portfolio is based on a current investment by
the University
6. As the portfolio manager in your company, which is now entering a new
product line to use robots to deliver packages, you have been in this role
for two years. Progress has been slow at times, but the executive team now
has embraced it. Detailed proposals must be prepared for new components,
which are then ranked and scored, and portfolio balancing occurs quarterly.
During this rebalancing, if components are terminated because others have
a higher priority, and resources are scarce, those involved seem surprised.
This shows:
a. Training guides in portfolio management would be helpful
b. Resource competency development requires more attention
c. Different portfolio reports should be submitted by component managers
d. Component managers should attend rebalancing sessions
Portfolio Performance Management ◾ 55
7. Assume you work for a recording company. You are to recommend one new
component to be optimized in the company’s portfolio. You only can select
one because of resource constraints. You can select Project A to develop
a web site, Program A to enter the music video market, Program B for a
major nationwide tour, or Project B for new T- shirts. You have net present
value (NPV) data available to assist you in making your recommendation
as follows:
Project A NPV Program A NPV Program B NPV Project B NPV
5% = 5,243 5% = 2,320 5% = 6,800 5% = 3,000
10% = 2,841 10% = 1,254 10% = 3,275 10% = 2,755
15% = 1,563 15% = 688 15% = 1,679 15% = 700
You recommend:
a. Project A
b. Program A
c. Program B
d. Project B
8. It is important to ensure the key stakeholders are supportive of strategic
portfolio changes, and stakeholder identication is not a one- time activ-
ity especially in your transit authority in which a new CEO tends to be
appointed every two years. As the portfolio manager, when you identify the
key stakeholders who should be involved or at least consulted, one objective
in doing so is to determine their:
a. Roles and responsibilities
b. Power and urgency
c. New pain points
d. Reactions
9. Assume in your Portfolio Management Ofce, you are using a mathematical
model to forecast future outcomes using historical results. Such an approach
has proven to be especially useful in terms of predicting whether com-
ponents in the portfolio will be completed on time and/ or within budget
especially for companies in which time to market is critical and do not want
schedules to slip. You decided to apply it to resource allocation as it can pro-
vide information:
a. On required resources
b. To show the effect on resource capacity
c. To show needed resource competencies not available in the company
d. To see if resource adjustments are warranted
56 ◾ PfMP® Exam Practice Tests and Study Guide
10. It is important not only to select the portfolio that has the greatest value
strategically but also to implement it. It becomes especially difcult when
nancial resources are limited and are a constraint after performing capacity
analysis. One approach to consider is:
a. NPV
b. ROI
c. Comparative advantage analysis
d. Resource allocation
11. In most organizations there are more proposed components to consider,
but there are constraints as to how much new work can be undertaken.
Fortunately, as the portfolio manager, you maintain an up- to- date list of
components in progress and receive status reports that you use when it is
time to meet with your Portfolio Review Board. At the upcoming meeting,
15 possible components are being proposed, but only ve can be selected.
This is based on:
a. Value delivery
b. Mandatory requirements
c. Financial analysis
d. Benets identication
12. While your solar panel and heating company has had steady business over
the last three years, the company wants to pursue additional markets as well
as maintain its existing market share. You are the portfolio manager for this
$50 million dollar company. However, nancial resources are scarce for new
initiatives, and you are putting in place a prioritization methodology. Your
goal is to understand the capabilities of the various software available rather
than letting the tool ‘become the fool’. You decided one approach would be
to focus on problem identication, such as the cost of capital being high,
and present a series of issues to understand systemic explanations, which
means you are focusing on:
a. Analytical hierarchy process
b. Prioritization algorithms
c. Constraint management
d. Simulation techniques
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