How to balance risk when managing a project portfolio

Wednesday, December 4th, 2013 By Jack Nevison

Businesses have limited resources. So when an important project comes down the pipeline, the competition for those resources becomes fierce. Anyone can make a good case for why a particular project should receive the most attention, but a skilled project manager will make this decision logically, with the best interests of the company in mind.

That's why a well-chosen project portfolio is so important.

Without proper planning, resources can be squandered. Sometimes, that short-term project gets an extra infusion of cash, leaving the long-term project to languish. This may be good for the company next week, but not next year.

In order to make the proper project allocations, managers should use economics. Luckily, the past 50 years have taught us a lot about how the economy works, and many of these lessons can be applied to the business world. 

It is particularly important to understand the risk and return of each project. Investors want to earn a reasonable return on their money, but the size of that return depends on how risky the venture is. Likewise, project managers must carefully consider whether each project is worth spending the resources—of both staff and money—for the expected return.

In addition, just as smart financial gurus balance safe investments with more risky ventures, project managers must build a portfolio that is financially stable, yet offers an opportunity for the occasional big payoff.

To find out how to choose a winning project portfolio, read New Leaf's free white paper, "An Economic Look at the White-Collar Project Portfolio" and take the post-test to earn PDU credits for PMP recertification.

"PMI®," "PMP®'" and "PMBOK®'" are registered marks of the Project Management Institute, Inc. All rights reserved.

"QPM™" is a registered mark of New Leaf Project Management. All rights reserved.

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