Risk Assessment: framework for combining CBA and MCDA
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| − | + | The portfolio and project management process has developed significantly in the last years, delivering a successful project has become more complex for project managers, having to consider many economic and social criteria. Yet, most of the project and program risk assessments are limited on the application of the Cost-Benefit Analysis (CBA). While the CBA provides a lot of insightful economic data (e.g., NPV, BCR, IRR), project assessments should consider also social and environmental criteria (e.g., economic development, public image, environmental sustainability) to strive for success. | |
| + | Therefore, the scope of the article is to set a framework for the '''Decision Support System (DSS) of projects/portfolios''', through the '''combination of the traditional Cost-Benefit Analysis and the more recent Multi-Criteria Decision Analysis (MCDA)''', by providing a combination of tools which considers monetary goals, as also non-monetary strategic goals. | ||
This process assumes that the first step of the appraisal, the CBA part, has already been completed, since the method is widely spread and used by the majority of the companies. | This process assumes that the first step of the appraisal, the CBA part, has already been completed, since the method is widely spread and used by the majority of the companies. | ||
| − | The article will also consider the limitations of this framework, | + | The article will also consider the limitations of this framework, particularly during the MCDA assessment, providing suggestions to mitigate the difficulties related to the weighting profile and criteria weighting, facilitating the decision-making process during the risk assessments of programs and projects. |
| − | In order to provide an effective and appliable tool for the reader, this article will focus on the application of the '''REMBRANDT technique''' during the MCDA | + | In order to provide an effective and appliable tool for the reader, this article will focus on the application of the '''REMBRANDT technique''' during the MCDA phase, and then on the '''COSIMA approach''', used to combine the results from CBA and MCDA. |
| − | , and then on the '''COSIMA approach''', used to | + | |
__TOC__ | __TOC__ | ||
Revision as of 20:08, 12 February 2022
The portfolio and project management process has developed significantly in the last years, delivering a successful project has become more complex for project managers, having to consider many economic and social criteria. Yet, most of the project and program risk assessments are limited on the application of the Cost-Benefit Analysis (CBA). While the CBA provides a lot of insightful economic data (e.g., NPV, BCR, IRR), project assessments should consider also social and environmental criteria (e.g., economic development, public image, environmental sustainability) to strive for success. Therefore, the scope of the article is to set a framework for the Decision Support System (DSS) of projects/portfolios, through the combination of the traditional Cost-Benefit Analysis and the more recent Multi-Criteria Decision Analysis (MCDA), by providing a combination of tools which considers monetary goals, as also non-monetary strategic goals. This process assumes that the first step of the appraisal, the CBA part, has already been completed, since the method is widely spread and used by the majority of the companies. The article will also consider the limitations of this framework, particularly during the MCDA assessment, providing suggestions to mitigate the difficulties related to the weighting profile and criteria weighting, facilitating the decision-making process during the risk assessments of programs and projects. In order to provide an effective and appliable tool for the reader, this article will focus on the application of the REMBRANDT technique during the MCDA phase, and then on the COSIMA approach, used to combine the results from CBA and MCDA.
Contents |
Introduction
CBA
Characteristics of the CBA analysis
MCDA
Characteristics of the MCDA analysis
Application
REMBRANDT technique
Description of the tool and its main features
Steps
Criteria selection
Alternatives and Criteria comparisons
Eliciting Weights
Consistency analysis
Sensitivity analysis
COSIMA approach
Overall application method, shadow prices and alpha percentage
