Measuring the effectiveness of risk assessment in project portfolio management

In increasingly complex and competitive markets, effective Risk Management practices are considered of upmost importance to deliver value in Project Portfolio Management systems. However, there is little literature and methodologies available to evaluate the effectiveness of Risk Management at the Project Portfolio level. This precursory study contributes to filling this gap through the definition of a set of indicators to measure the effectiveness, performance and ability of Risk Management processes to create value in Project Portfolio management. Based on the analysis of real project data from a large Project Portfolio of a major project-based company working in the automation industry, this study proposes a framework of six different Risk Management Key Performance Indicators. With reference to logs of both closed and open risks, the framework allows to measure at any point in time during the project execution the effectiveness of the Risk Assessment process to help project managers respond to threats, seize opportunities, and forecast future risks. Validation of the proposed framework has been achieved both through empirical analysis and expert interviews. The set of indicators is proposed as a valuable metrics to help Project Portfolio Managers improve their risk analysis and decision making standards and methodologies