PPM and Sensitivity Analysis

Chris Casey, PMP
IT portfolio managers are constantly on the lookout for better methods to help identify which projects will offer the most benefit to the organization. There are always more projects than the scarce IT resources can possibly complete successfully. Portfolio managers must then focus on those projects that align with the organization’s strategic objectives as well as provide positive financial benefits.
 
Implementing a simple scoring model that considers the project’s financial elements--such as Net Present Value (NPV) and Internal Rate of Return (IRR)--are useful, but they do not allow the portfolio manager to analyze how fluctuations in a project’s financial parameters can yield different results. Performing a simple sensitivity analysis will give the portfolio manager a much better idea on how susceptible a project is to financial risks.
 
Sensitivity analysis provides the portfolio manager insight into how sensitive the financial aspects of a project are when specific parameters are manipulated. One such financial indicator is the contribution margin, which--in this context--refers to how a project contributes to the potential profits or cost savings of the organization.
 
It is calculated by subtracting the estimated variable project costs from the estimated expected revenue or savings and dividing the result by the estimated …

Please login or register below to read the rest of the article.

Members login here:

If you were a member of gantthead.com, you are already registered here--just use the same username and password to login and enjoy the same valuable resources and connections you have come to rely on.

OR

OR

ADVERTISEMENT

Not a member yet? Sign up here:

You must have JavaScript and cookies enabled to use this website. Please enable javascript and refresh this page.
How do I enable JavaScript in my browser? | How do I enable cookies in my browser?
  • required fields
  • First Name
    Last Name
  • Pick a password
    Confirm your password
  • please enter the text below:


  • You must have JavaScript and cookies enabled to use this website. Please enable javascript and refresh this page.
    How do I enable JavaScript in my browser? | How do I enable cookies in my browser?

  • projectmanagement.com is accredited under Return Path's Sender Score Certified™ Program. The Sender Score Certified Program helps to increase successful email delivery by requiring senders to adhere to a set of specific email standards. For more information, please see www.senderscorecertified.com.
ADVERTISEMENTS

"I don't care to belong to a club that accepts people like me as members."

- Groucho Marx

ADVERTISEMENT

Sponsors