Current industrial practice of managing risks in product development project portfolios
Editor: Udo Lindemann, Srinivasan V, Yong Se Kim, Sang Won Lee, John Clarkson, Gaetano Cascini
Author: Weng, Richard (1,3); Oehmen, Josef (1); Ben-Daya, Mohamed (2); Finke, Gandolf (3)
Institution: 1: Massachusetts Institute of Technology, United States of America; 2: King Fahd University of Petroleum and Minerals, Saudi Arabia; 3: ETH Zurich, Switzerland
Managing portfolios of development and engineering projects currently presents significant challenges to companies. This is even more the case in the management of portfolio risks, where both industry and academia currently lack a clear conceptual understanding of what portfolio risks are and what influences them.
The objective of this paper is two-fold: First, based on a literature review and industry focus group discussions, we introduce a new model for describing portfolio-level risks. It consists of three types of risks (escalated risks, common cause risks, and cascading risks) based on 9 types of interdependencies in PD project portfolios (Technology, Budget, Objectives and Requirements, Infrastructure and Equipment, Skillset and Human Resources, Process and Schedule, Supplier, Legal and Regulatory, and finally Market and Customer).
Second, we investigate how risk management on the portfolio level is currently executed in industry. The paper describes the results of a survey with n=43 participants, investigating the frequency and impact of portfolio risks, and the influence of the interdependencies on the portfolio risks.