Introducing market observations and future trends into portfolios

Individual projects in a portfolio may have significant impacts on risk absorption capacity, financial success and development. However, project management often fails to view individual projects from an overall perspective. From the perspective of overall organisational management, however, observing changes in the operating environment and economic cycles are key to risk and opportunity management.

Among our clients, there is a clear trend of incorporating future indicators into investment and development projects. It is becoming increasingly common to supplement individual projects with data that facilitates potential or risk assessment and reporting. For example, projects with strategic objectives, or the significance of a particular risk in terms of sought business results are evaluated more commonly in portfolios.

Portfolio management on the agenda of strategic steering groups

Portfolio management is an essential part of development strategies of steering groups. Discussion topics of steering group meetings typically include development portfolio projects where raw material prices play a significant role in the success of business cases, as well as the overall financial impacts of the projects. In these situations, portfolio management on the operational level supports strategic management, elevates the quality of strategic evaluation discussions by providing a more factual basis while enabling quality decision making.

Making strategy changes visible

Certain Thinking Portfolio clients have reviewed how many projects or business analyses address phenomena or sector-specific changes determined during organisational trend mapping. This approach helps organisations understand how development projects support the reinvention of business operations, prioritize certain projects and systematically increase the number of projects that are aimed at long-term changes. The discussion also helps the entire organization understand sudden significant market observations and make necessary decisions accordingly.

Around this same theme of future management, we are collaborating with the Association of Finnish Local and Regional Authorities in developing a pilot project, which involves introducing long-term development objectives and indicators for steering development operations. While the pilot project is still in its infancy, it will help highlight aspects such as opportunities for cities and municipalities to participate in shared development and management, as well as development objectives that reach beyond organizational boundaries while also raising awareness of the types of objectives of individual projects or development measures.

How would an economic cycle indicator be actually incorporated into the portfolio?

On the project level, strategic objectives or key macroeconomic indicators could simply be selected when establishing the basic data of the project or investment target. On the portfolio level, it is possible to define an economic cycle indicator and monitoring, which enables cross tabulations, reports and visualizations of the cycle, areas of emphasis and various future scenarios.

As analytics and software robotics develop, creating models, calculations and maintaining client-specific market indicators and analyses will become more efficient. This means that key indicators of client-specific corporate governance goals can be updated regularly in the portfolio data, allowing companies to review portfolio reports for assessing investment risk levels vis-a-vis the economic cycle and the likelihood of the success of the investments.

Indicators help reach quality decisions

The key for our clients is understanding qualitative and quantitative changes in the operating environment, monitoring these changes and visualizing their significance. Major shifts, like the future of healthcare services in Finland, the aftermath of Brexit, sluggish global economy, or even recession, have comprehensive impacts on companies. When companies are caught off guard by, for example, an economic downturn, the result is often reactionary, suboptimal decisions, such as project cancellations.

Indicators help connect changes to investment decisions. The ability to connect change-related risks and opportunities and their impact on the assessment of investment decisions, the portfolio and areas of emphasis goes a long way in terms of strategic discussions of a company’s future. This is a change that has been evident among our clients, who are increasingly incorporating portfolio management processes into regular organisational strategy work.

Where to begin?

Are you looking to address organisational future management, risk management and development portfolio design? Are you looking to integrate future trends or market indicators into your portfolio? Have you determined key indicators impacting your business and have you connected them to specific areas of development?

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Contact us for further details!

GnS Economics & Thinking Portolio

Nina Orvola, Lead Senior Advisor, Thinking Portfolio +358 445051044