Risk management in project portfolios

Revision as of 19:25, 23 November 2014

This article is an overview and summary of relevant body of knowledge concerning risk management in project portfolios. Project portfolio management (PPM) is the set of managerial activities that are required to manage a collection of projects and programs needed to achieve stratetic business objectives.^[1] It has been widely accepted that Risk Management is an important part of Project Management. Project risk management enables an organisation to limit the negative impact of uncertain events and/or to reduce the probability of these negative events materialising, while simultaneously aiming to capture opportunities ^[2]. However, project risk management is only effective to a limited extent because it lacks a portfolio wide view. ^[3] The information available regarding risk management at portfolio level is fairly scarce. Methods like Monte Carlo Simulations can be used to create efficient frontier charts in order to best as possible choose risk/return balance within the portfolio. Numerical methods are however often associated only with risks (known unkowns) and not uncertanties (unknown unknowns).

Project Portfolio Uncertainty Dimensions

The uncertainties at the portfolio level can be found within three dimensions^[4]:

1. Uncertainty from the environment due to factors external to the company that affect the portfolio
2. Uncertainty from organizational complexity due to the parent organization's systems, structures and activities that affect the portfolio and include portfolio-level issues and inter-project dependencies
3. Uncertainty from single projects due to changes, deciations and unexpected events that may take place within the portfolio at the singe-project level and may have an effect at the portfolio level