Be Able to Identify, Analyse and Distinguish Between Appropriate and Inappropriate Application of Portfolio Definition Practices and Techniques to a Scenario MOP-PRACTITIONER Practice Questions (Page 2)

Questions 6–10

1. 6application · medium

   A pharmaceutical company is prioritizing its R&D portfolio. The head of R&D decides to rank all projects by their net present value (NPV) and selects the top 10 for funding, regardless of their strategic alignment or risk profile. Why is this prioritization approach inappropriate?

   • AIt is appropriate because NPV is the most objective and reliable measure of project value.
   • BIt is inappropriate because NPV is a complex financial metric that the executive team will not understand.
   • CIt is inappropriate because the head of R&D should not be involved in prioritization; this is the role of the finance director.
   • DIt ignores strategic alignment, which is a key criterion for portfolio prioritization, and may fund projects that do not support the corporate strategy.
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2. 7expert · hard

   A construction firm is defining its portfolio. The portfolio manager has a strong background in finance and decides to focus on financial data only, ignoring non-financial benefits and risks. He argues that financial data is the most objective and that other factors are too subjective. Why is this approach inappropriate?

   • AIt is inappropriate because financial data is always unreliable.
   • BIt is appropriate because financial data is the only objective measure of project value.
   • CIt is inappropriate because the portfolio manager should not have a finance background.
   • DIt ignores non-financial benefits and risks, which are essential for a complete understanding of the portfolio and for making balanced decisions.
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4. 8application · medium

   A bank has a portfolio of 40 projects. After prioritization, the portfolio manager balances the portfolio by cutting the bottom 10 projects from the ranked list, regardless of their category or strategic importance. He argues that this is the simplest way to stay within budget. Why is this balancing approach inappropriate?

   • AIt does not consider the strategic importance of the projects or the need for a balanced portfolio across categories.
   • BIt is inappropriate because the portfolio manager should not make balancing decisions alone; he needs approval from the CEO.
   • CIt is inappropriate because the bottom 10 projects should be given a chance to improve their scores before being cut.
   • DIt is appropriate because cutting the lowest-ranked projects is a standard and effective way to balance a portfolio.
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5. 9foundation · easy

   What is the appropriate content of a portfolio strategy and delivery plan?

   • AA summary of the organization's financial accounts.
   • BA list of all stakeholders and their personal contact details.
   • CA detailed project plan for each initiative in the portfolio.
   • DThe strategic objectives, the mix of initiatives, and the approach to delivering the portfolio.
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6. 10application · medium

   A food and beverage company is categorizing its portfolio. The portfolio manager proposes categories based on the product line (e.g., beverages, snacks, dairy). The marketing director argues that the categories should be based on the strategic objective (e.g., market share growth, cost reduction, innovation). Which categorization is more appropriate for portfolio definition?

   • AProduct line, because it reflects the company's organizational structure and makes reporting easier.
   • BBoth, because using two dimensions is always better than one.
   • CStrategic objective, because it allows the portfolio to be assessed against the company's strategic goals.
   • DNeither, because categorization should be based on project size.
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