Project portfolio management is about evaluating and prioritizing your projects and then selecting an optimal portfolio that maximizes value to your firm while not exceeding your risk tolerance. Each one of these steps – evaluating, prioritizing, and optimizing -has uncertainty associated with the inputs. By uncertainty, I’m referring to estimates around business attributes such as net present value and ROI, cost, number of resource requirements, time to market, risks, and so forth. All of these types of business attributes have uncertainty associated with the estimates that we make, however, most project portfolio models are incapable of handling this uncertainty and therefore yield skewed and unrealistic project valuations and, hence, do not serve as good foundations for making project portfolio selections. in this video, I’m going to show you how you can use Monte Carlo simulations in portfolio management to get a much more insightful and meaningful picture of your individual projects’ value and of your whole portfolio value.
