Managing portfolio transformation risk to help drive desired outcomes

Successful transformation often relies upon concurrent transformation efforts — and that requires proactive risk management to avoid conflicts or costly delays. In our June 2024 Pulse Survey, executives acknowledge the issue: Eighty-four percent say executing transformations at the pace needed to win in the market is a challenge.

You can improve your odds by taking a portfolio approach to transformation, looking across all efforts to assess dependencies, identify risks and implement corresponding controls. Many industry leading companies tackle this by balancing innovation and speed with targeted risk management protocols.

Transformation initiatives that we see organizations managing concurrently often span functional areas, exacerbating the complexity. Operating model and strategic positioning changes such as M&As, IPOs, back-office transformations, outsourcing and workforce realignments require holistic assessments to avoid issues like operational inefficiencies and strategic misalignment.

Technology transformations, workforce changes and evolving regulations often require focused compliance with strong control design, implementation and monitoring.

We’ve seen how organizations that outperform the competition recognize the need for ongoing evolution of their business, operating and growth models by employing strategic frameworks to expand their customer base, revenue or market share. We call this being outcomes obsessed. It requires putting the outcomes expected from transformations front and center — and understanding the dependencies among them.

While technology is often a critical enabler, it’s only part of the story. Transformations should be viewed as business changes that impact many functions and activities across the enterprise and influence expected outcomes. Answering questions that address these five outcome areas can help your organization and teams maintain proper focus and prioritize effectively:

Mapping the objectives of a given transformation to desired outcomes by looking across transformation efforts can help you gain a better understanding of all the changes taking place and how they might affect outcomes across your enterprise.

Take, for example, a mainframe modernization plan. How might it overlap with data migration needs related to readiness for evolving sustainability or cybersecurity regulations — or, for that matter, with implementing identity access management? How will upskilling impact employee productivity? Employee morale?

Does the new architecture provide the agility required to effectively tailor new products to customer demand and move the needle on customer experience? These are just a few of the many possible situations you should prepare for.

When it comes to technology risk and controls, evaluating dependencies across the portfolio can also help ease the way for transformations that often involve integrated systems.

Say for example, you migrate your ERP to the cloud, then want to leverage GenAI. You might find that you don’t have the right data architecture or the necessary processing power for AI services because these future needs weren’t part of the planning process. There’s most likely a solution, but it may end up costing a lot more to retrofit.

To more effectively align these efforts with overall business objectives, some companies have hired chief transformation officers or established purpose-driven offices to devise transformation strategy in collaboration with the C-suite and board. The idea is to connect the dots between various efforts and enable the business to proactively help identify and address new risks arising from all the business, technology, people and process changes that should occur simultaneously.

Each transformation may be spearheaded by a different functional team, but aspects of their individual and collective success hinge on a clear understanding of how they fit together — and how they help advance business strategy. Without a common framework and new ways of working, it may be impossible to facilitate timely identification and escalation of portfolio level risks and keep projects moving forward.

Even without a dedicated transformation office, you can set yourself up for success by establishing a common governance language and coordination points across organizations. Often, the organizations with the top track records align on expected business outcomes, identify risks and organizational impacts early, implement corresponding controls and actively monitor progress toward achieving desired outcomes.

Taking a portfolio approach that you can use to holistically view initiatives and interdependency risks across your enterprise — and make transformation a fixture on the C-suite and boardroom agenda — can help deliver the consistent results and value stakeholders expect.

To help transformations achieve desired results and effectively manage risk, keep a close eye on the five outcome areas — enterprise portfolio, portfolio delivery, business, technology and controls.

While you’re focused on a portfolio approach to transformation, it makes sense to collaborate as much as possible with leaders in charge of areas critical to managing transformation risk and enhancing transformation success rates. Working closely with the chief risk officer, for example, can help inform early strategic and transformation decisions. Our Pulse Survey found that only 31% of risk executives are involved in defining resilience strategies around operations or technology and IT management.

Help your C-suite colleagues see the value of involving risk leaders as well as tech and operations execs to help develop a transformation strategy that can support the enterprise, maps the dependencies and pinpoints risks.

Your organization’s long-term viability may depend on the success of your individual and collective transformation efforts. But transformation does not take place — and likely can’t succeed — in a vacuum. A portfolio approach can help you succeed.

Transformation efforts also provide an opportunity to strengthen trust with your employees, customers and in the market. Early and consistent focus on each of the five outcomes areas —enterprise portfolio, portfolio delivery, business, technology and controls— and their associated risks and controls can play a pivotal role in helping you achieve commitments and enhance stakeholder trust.

The changes companies seek to manage via transformation are numerous and complex: workforce, system, M&A, cloud migration and integration, regulatory readiness and many more. Understanding how all your transformation efforts work together can help you more effectively manage risk, generate insights and execute business strategy.