Project portfolio selection considering the hindrance to risk propagation: a dual-objective optimization approach

Abstract

The problem of project portfolio selection considering risk propagation is a new research topic, but it overlooks the fact that the risk propagation process can be hindered by resource mobilisation within candidate projects, which is defined as “risk absorption” in this paper. Neglecting this process may lead to the risk propagation process being overestimated. This study aims to investigate the problem of project portfolio selection considering risk absorption, and to work on selecting stable project portfolio. To address this issue, the article first examines the process of risk absorption among projects and calculates the amount of risk absorbed based on the strength of the interactions between the projects selected. Secondly, the total risk intensity of the project is given by calculating the risk propagation intensity and self-incurred risk intensity. Finally, a dual-objective project portfolio selection model considering risk absorption is developed by combining the risk intensity and net present value of the project. The analysis of a case study demonstrates that 1) considering risk absorption can reduce the probability of project risks occurring due to being propagated, 2) considering risk absorption will prioritize projects with higher returns, albeit accompanied by relatively higher risks.