Most
tools for project portfolio
management have shortcomings
that make them incapable of
accurately prioritizing projects.
One source of error is the
lack of proper algorithms for
correctly valuing risk. This
demo
illustrates the importance
of this omission.
Click New
Portfolio to generate
and prioritize 30 random projects.
The projects are displayed
as an efficient
frontier. Click any dot
to see the corresponding project
data.
Circles
indicate projects
whose only risk is project risk.
Project risk refers to the risk
that the project may fail to
deliver its promised benefits.
Project risk decreases the value
of a project.
Squares
indicate deferral risk is
the dominant risk. Deferral
risk refers to the potential
for losses to the business
if the project is delayed.
Deferral risk increases the
value of
a project.
More
serious risk.
"Without
risk analysis, project portfolio
management is nothing more
than a fad."
Scott Berinato, "Playing with Fire" CIO
Magazine
Risk
seriousness and the necessary
value adjustment depend on
the organization's risk
tolerance. Use
Tools > Set Risk Tolerance to
change tolerance for risk.
Click Adjust
for Risk to see
the impact of correctly valuing
project and deferral risk.
Notice the dramatic change
(unless risk tolerance is
very high) to project priorities
as well as the impact on
the value of the project
portfolio!
Inadequate risk
analysis is one of several reasons that
organizations choose the wrong
projects. Be sure to select
a project portfolio management
tool that correctly values
risk.
Circles
indicate
Squares
indicate deferral risk is
the dominant risk. Deferral
risk refers to the potential
for losses to the business
if the project is delayed.
Deferral risk increases the
value of
a project.
More
serious risk.
