This chapter describes how to create a portfolio planning cycle, and the planning cycle attributes.
This chapter covers the following topics:
A portfolio planning cycle is a series of activities that are dedicated to examining and approving a set of projects. During a planning cycle, you decide which projects to fund based on the strategic and financial goals of your company.
You can create a planning cycle whenever a business change occurs or a periodic review process takes place. For example, you might create a planning cycle during your company's annual planning and budgeting cycle.
The Vision Corporation creates planning cycles during their annual planning and budgeting cycles. This organization is required to develop formal plans for the type of work they will perform for each fiscal year. The formal planning process can include:
Developing documentation of the planned work
Periodically updating a capital investment portfolio to reflect the current year's budget
Conducting a performance review of the prior period
You can use Oracle Project Portfolio Analysis to prepare, perform, and track each step in the process, and use the planning cycle to determine which projects to fund.
During a planning cycle, the portfolio analyst and portfolio owner develop and analyze scenarios, and then recommend scenarios for approval. The portfolio approver is responsible for approving a single scenario and the portfolio plan. You can create a new planning cycle for a portfolio after the portfolio plan is approved and closed.
Note: Only one planning cycle can be active in a portfolio. You can create a new planning cycle for an existing portfolio after the prior planning cycle has been closed.
Planning cycle activities include:
Creating and initiating the planning cycle
Submitting projects to the planning cycle
Collecting projects and developing scenarios
Comparing scenarios
Recommending scenarios for approval
Submitting the portfolio plan for approval
Approving a scenario and a portfolio plan
Closing the portfolio plan
When you create a planning cycle, you specify the following objectives:
Investment criteria
Targets for financial metrics
The investment mix (how funds will be allocated between the investment class codes in the portfolio)
You define the following attributes for a planning cycle:
Basic information, including the investment class category, planning cycle period details, and the planning cycle currency
Investment criteria that are used to evaluate projects by scores against your strategic objectives, and target score ranges for strategic groups
Financial information, including the portfolio discount rate, funds available, and a display factor for the portfolio. You also define acceptable target ranges for the portfolio's financial metrics, which are:
Net Present Value
Internal Rate of Return
Payback Period
Return on Investment (ROI)
The percentage of funds to be allocated to each investment mix (Investment Class Code)
A distribution list of users and roles that receive notifications of planning cycle activities, and a due date on which eligible projects can be automatically collected into the portfolio.
To create a planning cycle:
Open the Create Planning Cycle page.
Enter the planning cycle name and description. You can choose to save the planning cycle at this point by applying the changes.
Enter the details for the planning cycle attributes, which are: Investment Criteria, Basic Information, Financial Information, and the Distribution List.
Save your work.
When you create a planning cycle, you assign financial, strategic, and general details to it that assist with project analysis, project evaluation, and the selection of projects that will be collected into the planning cycle.
You can use the planning cycle checklist to perform the actions in the following table:
| Action | When You Can Perform This Action |
|---|---|
| Review Strategic and Financial Criteria | The planning cycle status is Created or Null |
| Initiate Planning Cycle | The icon is enabled when the planning cycle is created, but not initiated |
| Collect Projects | After the planning cycle is initiated, until one of these events has occurred:
|
| Develop Scenarios | After projects are collected into the initial scenario, until you submit a scenario for approval |
| Submit Plan for Approval | After a scenario is recommended for approval |
| Approve Plan | After a scenario is approved, and the planning cycle status is Submitted |
| Close Planning Cycle | After the planning cycle is created |
Investment criteria help portfolio analysts evaluate project investments. Oracle Project Portfolio Analysis uses a combination of financial and non-financial (strategic) criteria. Portfolio analysts evaluate both types of criteria when reviewing projects that are being considered for funding in a planning cycle.
You define the Investment Criteria in a planning cycle to execute the following functions:
Define weights of strategic objectives for each strategic group
Define weights of strategic groups for calculating the weighted strategic score
Define target scores for the weighted strategic score of strategic groups and criteria
Strategic groups and objectives are shared throughout your organization for every planning cycle. Portfolio analysts can select the strategic criteria to use for planning cycles. You select the strategic criteria for each planning cycle by determining the relevance of each strategic group and objective for a planning cycle, and assigning weights (as percentages) to the criteria. Oracle Project Portfolio Analysis uses the weights when calculating the weighted strategic score for projects, investment class codes, and scenarios.
Vision Corporation analyzes projects in terms of risk, for which a strategic group named Risk Assessment has been created. Individual strategic criteria focused on Risk Assessment have been created for that group. Within the Risk Assessment group, the implementation team can define criteria to measure the risk to the company's schedule, cost, or resources. A portfolio analyst creating a planning cycle determines the importance of risk to the planning cycle, and assigns a weight to the Risk Assessment group and all of its subordinate strategic criteria.
Portfolio analysts enter target values for financial and strategic criteria in planning cycles. Target scores enable you to define internal standards for a portfolio and for project assessment. After setting the target scores, you can track how well organizations are aligning with the investment criteria defined for your company.
You enter overall target score ranges for the planning cycle's financial and strategic criteria. Within the strategic criteria, you assign target scores for each strategic group. You can enter target scores for the financial criteria when defining the financial information for a planning cycle.
To evaluate a project based on multiple criteria, you can score a project, investment class code, or scenario using a set of strategic groups and objectives. Oracle Project Portfolio Analysis combines the results to calculate a single weighted strategic score for each project. The weights used are the percentages you assign to the strategic criteria for the planning cycle.
At the investment class code and scenario levels, the weighted strategic score is calculated as the average weighted score for all approved projects in the scenario or investment class code, weighted by the planned cost of those projects. Oracle Project Portfolio Analysis requires that the total sum of weights be 100 percent for:
Financial criteria versus strategic criteria
All strategic groups
All strategic objectives within a strategic group, even if a value of zero percent is assigned to a specific strategic group
Related Topics
Implementing Oracle Project Portfolio Analysis, Oracle Projects Implementation Guide
You define basic information for a planning cycle such as the investment mix, calendar, and currency attributes. If a planning cycle that is in Closed status exists for your portfolio, certain attributes from that planning cycle appear as default values on the Basic Information page. These values are:
Investment Class Category
Calendar
Period Type
Currency Code
Currency Conversion Rate Type
Currency Conversion Rate Date
You can override the default values for a new planning cycle.
A portfolio analyst assigns an investment class category to the planning cycle, which helps to select projects for the planning cycle. Project managers are responsible for assigning that investment class category and one of its class codes to the projects they plan to submit to the planning cycle. If a project does not contain the investment class category that is assigned to a planning cycle, it is not eligible to be collected in the planning cycle.
Oracle Project Portfolio Analysis calculates the aggregate net present value, return on investment, internal rate of return, and payback period for each investment class code assigned to the projects in a planning cycle.
The planning cycle calendar defines the range of time for which you are planning. To do this, specify the following information for the planning cycle:
Calendar
Select a calendar that is defined in Oracle General Ledger. You can use different calendars for each planning cycle. Therefore, if there is a default calendar value in the field, verify that it is the one you want to use for the current planning cycle.
Effective Period To
Select a period for Oracle Project Portfolio Analysis to use as the last period for calculating the total cost, net present value, internal rate of return, and return on investment for your planning cycle. The default value is the last period defined in Oracle General Ledger for the selected calendar.
Funding Periods
Select the range of periods during which funds available and funds required are to be considered for the planning cycle.
Note: Some projects may extend beyond the "Funding Period To" period. For those projects, only costs that are scheduled to occur within the range defined by the "Funding Period From" and "Funding Period To" periods are considered.
You can align your portfolio planning with your company's budget cycle processes by setting the funding periods to coincide with the time allotted for your budgeting period.
As a portfolio analyst, you can configure the currency attributes for your planning cycle. You specify values for the Currency Code, Conversion Rate Type, and the Conversion Rate Date.
Related Topics
Implementing Oracle Project Foundation, Oracle Projects Implementation Guide
Implementing Oracle Project Portfolio Analysis, Oracle Projects Implementation Guide
Investment Class Category in Oracle Project Management
A portfolio analyst can define the following financial information for a planning cycle:
Discount rate
Funds available
Display factor
Target values for the financial metrics
The distribution of funds (as percentages) among the class codes for the selected investment class category
As a portfolio analyst, you define ideal target ranges for each financial metric. These target values enable you to define internal standards for the projects in your planning cycle. After setting the target scores and collecting projects into scenarios, you can track the performance of each project by comparing it to the acceptable target values of the financial metrics.
The discount rate is the minimum acceptable rate of return on an investment. You specify the annual discount rate to be used for calculating net present value and the payback period for planning cycles and scenarios. The default value for the discount rate is automatically applied to the scenarios in the planning cycle. However, you can change the value for each scenario.
Funds are available to spend for the funding period defined for a planning cycle. You enter the total funds available for the portfolio plan, and enter percentages in the investment mix to define the funds distribution to each investment class code. The total percentage of available funds for the investment class codes must equal 100 percent.
The funds available amount that you enter for the planning cycle is the default funds available amount for each scenario. However, you can adjust the value for each scenario in the planning cycle. The funds available amount that you specify is also used to calculate the funds allocated to scenario projects.
The portfolio analyst selects a display factor, which is a divisor for displaying numeric values in a planning cycle. The display factor does not change the amounts, only the way they are displayed. You can choose to display amounts as their original value, or by thousands, millions, or billions. Displayed amounts roll up from the project level, to investment class category level, to the scenario level.
A planning cycle named 2006 Capital Spending Plan contains projects A, B, and C. The funds available for the projects are listed in the following table:
| Project | Funds Required (in USD) |
|---|---|
| Project A | 1400.49 |
| Project B | 299.51 |
| Project C | 300.00 |
If the portfolio analyst selects to display the amounts as the original values, the funds available for the investment class category is displayed as 2000 (1400 + 300 + 300).
If the portfolio analyst selects to display amounts as thousands, the funds available for the investment class category is displayed as 1 (1 + 0 + 0).
If the portfolio analyst selects to display amounts by a factor higher than thousands, a value of 0 is displayed.
The display factor that you select is used to display funds required, funds available, funding variances, costs, benefits, and other financial attributes of a planning cycle.
Oracle Project Portfolio Analysis provides a set of standard financial criteria to assist portfolio analysts with evaluating the projects in a planning cycle. The financial criteria are:
The net present value is the discounted cash amount of the expected net gain or loss from an investment. This is calculated by discounting all expected future cash inflows and outflows to the present time. Oracle Project Portfolio Analysis calculates net present value at the project level, and rolls it up to the investment class code and scenario levels.
The net present value of a project is the discounted cash amount of the expected net gain or loss from a project. Oracle Project Portfolio Analysis calculates this value by discounting all future revenues and costs for the project to the present point in time, based on the planning cycle discount rate.
The net present value of an investment class code or scenario is the sum of the discounted cash amount of the expected net gain or loss from all approved projects in the investment class code or scenario. Oracle Project Portfolio Analysis calculates this amount by discounting all future revenues and costs for the approved projects in the investment class code or scenario.
Oracle Project Portfolio Analysis only considers the expected costs and revenue from periods that are within the planning cycle's funding periods, from the Effective Period From period to the Effective Period To period.
The internal rate of return is the discount rate at which the present value of future revenues of a project, investment class code, or scenario is equal to the present value of future costs of that project, investment class code, or scenario. If you use the internal rate of return as the discount rate, the net present value of the project, investment class code, or scenario is zero.
Oracle Project Portfolio Analysis calculates the internal rate of return at the project, investment class code and scenario levels.
The internal rate of return for a project is the discount rate at which the present value of the future revenues of the project equals the present value of the future costs of the project, such that the net present value of the project is zero when using the internal rate of return as the discount rate.
The internal rate of return for an investment class code or scenario is the discount rate at which the net present value for all projects with a recommended Funding Approval Status of Approved is zero when using the internal rate of return as the discount rate. Projects that have a recommended Funding Approval Status of Rejected or On Hold are not considered when calculating the internal rate of return.
Oracle Project Portfolio Analysis only considers the expected costs and revenue from periods that are within the planning cycle's funding periods, from the Effective Period From period to the Effective Period To period.
The payback period is the amount of time it takes to recover the initial amount invested, without regard to the time value of money. Oracle Project Portfolio Analysis calculates payback period at the project, investment class code, and scenario levels.
The payback period of a project, investment class code or scenario is calculated as the number of months that it takes to recover the total cost of the project, investment class code, or scenario from the beginning of the funding period.
The return on investment is an index that is used to evaluate projects for which net present values have been determined. Projects with high return on investment numbers are beneficial to the organization. The return on investment for a project, investment class code, or scenario is determined by dividing its net present value by its total cost.
The investment mix represents the intended distribution of funds in a portfolio among the investment class codes. You enter a percentage for each investment class code according to how you want Oracle Project Portfolio Analysis to distribute the funds.
The distribution list is a list of Oracle Projects users or roles that are notified when a planning cycle status changes. You can define the distribution list by role or by person.
You can select send notifications of planning cycle activities to all users that are assigned to a specific role in Oracle Projects. For example, if you specify Project Manager in the distribution list, all users that have a role of project manager on any project in Oracle Projects receive notifications pertaining to your planning cycle.
Note: If you add a role to the distribution list, all of the individuals in your company who are assigned to the role receive notifications of the planning cycle activities, even if they are not performing work related to your planning cycle.
You can select any individual who is defined in Oracle Human Resources Management Systems to receive notifications of planning cycle activities. This option enables you to specify named individuals to participate in the portfolio planning process who are not assigned to a project role.
When you create a distribution list for your planning cycle, Oracle Workflow sends notifications to the specified roles or people when the following activities occur:
You initiate a planning cycle
The portfolio approver approves a planning cycle
The users that you specify, and the individuals assigned to the roles that you specify, receive workflow notifications requesting them to manually submit their projects to be considered for inclusion in the planning cycle. The notification contains these details about the portfolio and the planning cycle:
Portfolio name
Planning cycle name
Portfolio selection class category and class code
Investment class category
Cost and benefit financial plan types defined for Oracle Project Portfolio Analysis
Oracle Workflow also sends notifications of planning cycle activities to portfolio analysts and portfolio approvers. Portfolio analysts receive notifications when a portfolio plan is initiated, approved, rejected, or closed. Portfolio approvers receive notifications when a portfolio plan is submitted or closed.
You can optionally enter a planning cycle due date to specify a date for Oracle Project Portfolio Analysis to automatically collect projects into the initial scenario of your planning cycle. The automatic project collection can occur only after you initiate the planning cycle.
After you define a planning cycle, you initiate it to collect projects into a scenario. You initiate a planning cycle after you enter and save the required planning cycle details, and the planning cycle status is Created. When you initiate the planning cycle the status changes to In Collection.
To initiate a planning cycle:
Open the planning cycle Checklist.
Select Initiate Planning Cycle.
You can view the planning cycle status from the My Portfolios page, and from the planning cycle pages of a portfolio.
The following table describes the planning cycle statuses:
| Planning Cycle Status | Description |
|---|---|
| Created | The planning cycle is created and the portfolio analyst is entering data. |
| In Collection | The portfolio analyst has initiated the planning cycle, and Oracle Workflow has sent notifications to the users on the planning cycle distribution list. The users can submit projects to the planning cycle. |
| In Analysis | Oracle Project Portfolio Analysis has collected projects into the initial scenario. The portfolio analyst can review the submitted projects, assign project scores against strategic objectives, and create additional scenarios. Projects can be added to the scenarios. New projects are automatically added to the initial scenario. |
| Submitted | The portfolio analyst has submitted the plan for approval. |
| Approved | A scenario and planning cycle are approved. Further analysis is allowed, but the plan cannot be resubmitted. |
| Closed | The planning cycle is closed and no further changes can be made. |
You can have only one planning cycle for a portfolio in an active status at any time. All of the statuses except Closed are active statuses.