PAPERS September 2008 ? Project Management Journal ? DOI: 10.1002/pmj 97 INTRODUCTION ? I n 1952, Harry Markowitz introduced the concept of modern portfolio theory into the financial inve ...

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PAPERS
September 2008 ? Project Management Journal ? DOI: 10.1002/pmj 97
INTRODUCTION ?
I
n 1952, Harry Markowitz introduced the concept of modern portfolio
theory into the financial investment domain (De Reyck et al., 2005). This
theory permitted the determination of an investment selection that
generates the highest return for a given level of risk; in other words, the
maximization of investment returns. This concept was later applied to
the project management domain, which became the basis of project portfo-
lio management. Today, project portfolio management is defined as “. . . the
centralized management of one or more portfolios, which includes identify-
ing, prioritizing, authorizing, managing, and controlling projects, programs,
and other related work, to achieve specific strategic business objectives”
(Project Management Institute [PMI], 2006a, p. 5). In line with Markowitz’s
approach, a project portfolio is a collection of projects that maximizes the
portfolio value in terms of strategic goals for a given level of risk. Value can
be, for instance, the scientific contribution or the creativity development
delivered by the project portfolio (Beaujon, Marin, & McDonald, 2001;
Martinsuo & Lehtonen, 2007; Weisbin, Rodriguez, Elfes, & Smith, 2004). As
such, organizations create project portfolios to implement strategic plans
and to achieve strategic goals.
Because of its strategic orientation, project portfolio risk must be seen in
the same manner. McFarlan (1981) suggests, for example, leaving aside the
narrow approach of viewing portfolio risks only in terms of schedule or budget
variations and doing appropriate trade-offs between risk vs. strategic-benefit.
On the other hand, integrated risk management is considered “. . . a continuous,
proactive, and systematic process to understand, manage, and communicate
risk from an organization-wide perspective. It is about making strategic deci-
sions that contribute to the achievement of an organization’s overall corpo-
rate objectives” ( Treasury Board of Canada Secretariat, 2007).
Despite the importance of a project portfolio on corporate objectives,
literature on portfolio risk management has been relatively sparse. This
article intends to open a discussion about the integration of a risk manage-
ment approach to project portfolio management by proposing a portfolio
risk-opportunity identification framework. The proposed framework aims
to help to decrease the uncertainty of achieving the goals of a project port-
folio by orienting the manager’s decisions toward the strategic vision of the
organization.
The remainder of this article is organized as follows. First, a brief litera-
ture review on project portfolio management practices is presented in the
next section. Then, we propose a framework for conducting the identifica-
tion of project portfolio risks and opportunities. A demonstrative example
illustrating how such a framework could be used is also presented. Fina