Barry:
Good question. Project Portfolio Management endeavors to give senior management the ability to oversee many projects as groups of projects, each group with a unique risk and return rating.
The key here is in the creation of the portfolio. Unlike financial portfolios, where a mix of different equities can be used, project portfolios should be structured around similar types of projects or activities. Mixing project activities within a portfolio, say a manufacturing job with a software development job, will skew the risks and returns of the portfolio.
With a portfolio of projects with similar features established, management then has the ability to determine a new project's risk level against similar projects at the outset. Further, risks are evaluated and assessed within the portfolio and decisions made regarding tools, resources, and requirements for these projects.
We will discuss the issue of risk and how project portfolio management helps reduce project risk in future articles, so stay tuned.
