Risk management can be said to be adopting an approach which is proactive in nature so as to reduce the unknown aspects and probable losses that might be linked to a given project. A risk can be said to be a situation, which when it happens, can have a highly negative or, highly positive impact on the objectives of a given project. Risk is said to have three major attributes: these include; it defines a situation that will happen in the future; its probability of happening is believed to be higher than zero percent, but less than 100% and the effects of risk are mostly unplanned for and unexpected.
There are a number of tools that can be used to assess and evaluate risks that might affect a given company. Looking at a company that mainly deals with producing products from plastic materials that are recycled and given that it wants to introduce new products into the market, it is highly advisable that the company adopts the portfolio management tools so as to come up with effective and efficient decisions that will in the long run lead to the desired results. A project portfolio can be said to be a group of collected projects that are put together so as to come up with an effective dealing of a given work (Hornberger, 1981). The aim of having a portfolio management is that a company can be able to come to an optimal balance between goals and objectives of a business entity and risks that it is likely to face during its running period. In addition, it helps the company to fully optimize the available resources which in most cases are usually limited among the existing entities.
The company having assessed and found that the most common risks that it faces are the technical risks and the commercial risks, in addition to using the three models of assessing new products: these include; visual model, scoring model and Heuristic model, it can also use other methods of analysis that will help the company to obtain a balance. One of these methods is looking at the process of innovation from when the notion was brought up to the time it will be implemented in relation to such variables as required resources and projections of future cash flow. Moreover, this analysis gives the company the opportunity to look at the idea when it is brought up hence; the company can be able to know that during innovation, it can reduce, retain or, increase the speed at which the process is being used (Kennedy, 2007).
Productivity index can be said to be different and diverse metrics with the aim of showing the most efficient project that can be adopted in project prioritization. In addition, productivity index is the ratio of a given quantity to be maximized and a given quantity that is perceived to be a constraining resource. Another method that can be used is the aid of reducing uncertainty in relation to portfolio project management is sensitivity analysis. Sensitivity analysis can be said to be the study of how a given models output might be uncertain and can therefore, be linked to other causes of uncertainty in the input of the models. The projects of the company are highly founded on future events of quantifiable variables such as costs, demands and customers. Sensitivity analysis enable s a company to know to what aspects the project’s viability is determined by the quantifiable variables. In addition, the viability or importance of a given project is evaluated on the basis of comparing the economic opportunity cost of capital to the internal rate of return. Therefore, sensitivity analysis can help the company to determine and look at the factors that can lead to uncertainty (Scott, 2000).
Conclusion
In conclusion, I believe that the use of evaluation tools and the project portfolio management are highly crucial when a company wants to determine which project is more viable and will bring back favorable returns in relation to the goals and objectives.
Bibliography
Hornberger, G. and R. Spear (1981). An approach to the preliminary analysis of environmental systems. Journal of Environmental Management 7, 7–18.
Hall, Gary K. "medicine for stye." N.p., n.d. Web. <http://www.styestreatment.com/best-stye-medicine-antibiotics-otc-or-home-remedies.html>.
Kennedy, P. (2007). A guide to econometrics, Fifth edition. Blackwell Publishing.
Saltelli, A., K. Chan, and M. Scott (Eds.) (2000). Sensitivity Analysis. Wiley Series in Probability and Statistics. New York: John Wiley and Sons.
