Risk Management in Project Portfolios is More than Managing Project Risks: A Contingency Perspective on Risk Management

Abstract

■ Project risk management aims at reducing the likelihood of project failure. To manage risk in project portfolios, research suggests adopting a perspective that is wider than the individual project risk. The results from a hierarchical multiple regression analysis on a sample of 177 project portfolios suggest that formal risk management at the project level and integration of risk information at the portfolio level are positively associated with overall project portfolio success. Simultaneous risk management at both levels increases this positive effect. Furthermore, risk management at the project level is more important for R&D-dominated project portfolios, whereas the integration of risk information is more important with high levels of turbulence and portfolio dynamics. KEYWORDS: project portfolio management; portfolio risk management; project risk management

Project managers’ overconfidence: how is risk reflected in anticipated project success?

“…Raz et al (2002) assess the usage of five risk management practices, including risk assessment in terms of estimated risk occurrence probability and estimated risk impact, and find that the usage of these risk management practices contributes to meeting budget goals in projects characterized by high uncertainty. Teller et al (2014) and Salomo et al (2007) find that the application of formal project risk management leads to higher project portfolio success. Likewise, Oehmen et al (2014) find that risk management practices, including the quantification of expected impacts of risks on main project objectives, or the systematic monitoring and reviewing of risks, positively influence decision-making quality, the stable execution of the project plan, and a proactive project organization.…”

“…Nevertheless, when starting projects with the goal to, for instance, optimize internal processes or create competitive advantage through innovative product development, risk taking is an inevitable prerequisite for achieving company goals (Brockman et al 2012), as there is no such thing as a risk free project (Huff and Prybutok 2008). It is widely acknowledged in project management literature that risks may have positive or negative effects on a project's objectives (Bryde and Volm 2009;Maguire and Hardy 2013;PMI 2008) and therefore may not only be a threat to project success, but also create opportunities (Teller et al 2014). However, project risk management processes still focus on potential negative effects (Bryde and Volm 2009;Raz et al 2002), and risks in a project management context usually refer to uncertain events with negative or undesirable consequences (Maguire and Hardy 2013;Oehmen et al 2014).…”

“…While assessing both the impacts of risks and the probability of them occurring contributes to project success (Oehmen et al 2014;Raz et al 2002;Salomo et al 2007;Teller et al 2014), it has not been investigated how risk assessment is considered in anticipations of project success. We propose that many projects may fail to achieve project objectives as a result of risks being insufficiently considered by project managers, thus leading them to make overly positive projections for project success.…”

“…Risk assessment in project management is carried out by quantitative risk analysis, which is a central part of risk management (Raz et al 2002;Teller et al 2014). Quantitative risk analysis is defined as ''the process of numerically analyzing the effect of identified risks on overall project objectives'' (PMI 2008, 294).…”

“…Risks are inherent in every project (Huff and Prybutok 2008) and defined as uncertain events that exert positive or negative effects on a project's objectives (Bryde and Volm 2009;PMI 2008), making risks a likely reason for deviations from the project management plan. Various studies have found that project risk management measures, including assessing the impacts of risks and the probability of them occurring, are key contributors to project success (Oehmen et al 2014;Raz et al 2002;Salomo et al 2007;Teller et al 2014). What has not been investigated, however, is how risk assessment influences project managers' anticipated project success.…”