Read the article below and answer all the questions in this section. MANAGING PROJECT PORTFOLIOS TO UNLOCK TRAPPED CAPITAL Large infrastructure projects come with an array of challenges. Projects are getting more complex, remote building locations are more common, budgets are larger than ever, and schedules can extend for multiple years. The COVID-19 pandemic has also wreaked havoc on various projects and increased the need to free up cash. Against this backdrop, it is hardly surprising that project owners often struggle to estimate costs. Due to market uncertainty and ongoing questions about the global economic outlook, many companies are freeing up cash by deferring capital expenditure. McKinseys data indicate capital expenditure was cut by 25 to 30 percent in 2020, with cuts of 60 to 80 percent in sectors such as transportation, pipelines, and oil and gas. Nevertheless, companies still have to manage their current projects, and future revenue generation will require continued and significant investment. What is needed is a shift in capital-outlay approach from survival minimum to strategic optimum. A major driver of capital efficiency is the extent to which capital becomes trapped within project portfolios. Businesses have traditionally taken a bottom-up estimating approach to developing and setting the budget for investment projects. While project-level development and accountability are crucial, a lack of clear direction on risk analysis and budget development can lead to an inefficient use of capital. A portfolio-level perspective can help to optimize capital expenditure and ensure consistency at both the business-unit and individual project levels. This approach should involve a better understanding of risk management, alignment on acceptable levels of risk tolerance, and the elimination of systemic biases in either directionin the construction of initial cost estimates. Implementing new processes for project approval and risk management requires a strong commitment from leadership and a sustained changemanagement effort. However, businesses that rethink the way they manage capital-investment risk will be well positioned to thrive in the next normal. Leadership drives the change Among the many lasting changes from the COVID-19 pandemic is an increased focus on the importance of preserving capital while meeting short- and long-term investment needs. As part of this, leaders will need to rethink where and how capital-expenditure risks are managed. Progress will require an in-depth reassessment of organizational culture, as well as key project approval and risk-management processes. This is not easy, but the rewards are significant; trapped capital can be unlocked, short-term capital expenditure can be reduced, and systematic improvements in cost-risk performance can be realized. These changes will position companies to optimize portfolio performance once capital expenditure begins to ramp up again in the post pandemic world.

QUESTION 1 (10 MARKS)

A major driver of capital efficiency is the extent to which capital becomes trapped within project portfolios. Businesses have traditionally taken a bottom-up estimating approach to developing and setting the budget for investment projects. In light of the statement provided discuss your understanding of project portfolios and highlight the benefits associated to managing project portfolios.

QUESTION 2 (10 MARKS)

Implementing new processes for project approval and risk management requires a strong commitment from leadership and a sustained change-management effort. Do you agree with this statement? Substantiate your response using relevant examples.

QUESTION 3 (10 MARKS)

In the context of capital projects, provide a descriptive account of why project managers have increased their emphasis towards investing in risk management