Monitoring and Managing Business Performance from a Portfolio Perspective
- John I. Howell III (Portfolio Decisions, Inc.) | James R. DuBois (Portfolio Decisions, Inc.)
- Document ID
- Society of Petroleum Engineers
- SPE Annual Technical Conference and Exhibition, 5-8 October, Denver, Colorado
- Publication Date
- Document Type
- Conference Paper
- 2003. Society of Petroleum Engineers
- 7.2.3 Decision-making Processes, 4.3.4 Scale, 1.6 Drilling Operations, 7.1.5 Portfolio Analysis, Management and Optimization
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Corporations often begin each year with a corporate strategy, a business plan and high expectations of success from their pending business operations. As they execute the business plan they meet with successes and failures, all the time wondering if they should reassess future business plans. Are they better off drilling the remainder of the proposed opportunities, or should they reconsider other opportunities? These decisions are frequently impacted by emotion and intuition as much as by technical analysis.
Throughout the year, corporate executives routinely share information with analysts and stakeholders about their results to date. The information reflects their reactions to the results received to date as tempered by their expectations for the remainder of the year. This system of information collection, analysis, decisions and communication frequently lacks consistency and can be quite time consuming.
This paper will illustrate how companies can use portfolio management techniques to improve the efficiency of their business plan monitoring and the quality of the information available to the decision process. We will show how portfolio management can be used to track corporate performance and continually reassess the remaining business plans throughout the year. As results are derived, the company can use portfolio processes to monitor the expected business results and the probability of meeting their goals. We will illustrate how portfolio management can help decision makers determine when to change plans and when to stay on the planned course.
Portfolio Management and portfolio analysis techniques are becoming an accepted part of investment analysis and strategic planning exercises in our industry. Many users limit themselves unnecessarily to a very narrow range of problems when using these techniques, usually based around finding the elusive "optimum" capital allocation scheme. In reality, portfolio management techniques are a powerful set of tools with broad applicability. This applicability can be categorized into at least three groups:
There is a growing body of literature addressing the first two applications. This paper will start to examine the third.
In order to effectively use portfolio management techniques, it is important to have a clear idea as to what are the company's strategic goals. The whole basis of the method is that it is goal-driven; we are trying to find a "best" portfolio that meets all of our strategic goals for a number of years into the future. Unless we know where we are going, the goal seeking capabilities of a good portfolio tool are wasted.
Once we know where we want to go, we can use the portfolio model to develop a plan of how to get there. Developing this plan is a subject unto itself, and has been discussed previously by the authors and others.1,2,3
|File Size||583 KB||Number of Pages||12|