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Context
Analysis of return on investment and downside risk are key components in making investment decisions and determining a financial portfolio. Similar analysis techniques can be applied to the selection of a portfolio of projects by construction or professional service firms.

Firms bidding on projects must consider:

  • What are the minimum acceptable conditions required to make an investment?
  • What funding and resource constraints exist, which limit the ability to undertake the project?
  • What is the probabilistic likelihood of financial success for the project?
  • What is the risk/reward profile resulting from the portfolio of selected projects and how does this change as additional projects are added to the existing portfolio?

Such decisions require an understanding of past performance and how this performance varies across different sectors, regions and managers. A consistent framework is criticial in allowing comparisons across projects and when applying optimisation algorithms in the selection of a portfolio.
 

Modelling Approach
Evans & Peck developed an Executive Dashboard for an international professional services firm, which allowed them to assess their past project success by evaluating profits/losses based on country (region) and directors.

This tool gave our client insights into the possible areas requiring improvement, and provided a benchmark for future project selection decisions. The objective was to assist the client to maximise returns and at the same time minimise effort expended.

Key features of the model:

  • An easy-to-use interface for presentation of analysis to upper management
  • Ability to perform simple sensitivity analysis to enhance decision making
  • Graphical presentation of thorough portfolio performance analysis including:
    • Pareto analysis
    • Downside risk analysis
    • Efficient frontier analysis (enabled by Evans & Peck's project portfolio optimisation tool)

The approach used is modular and readily adaptable to client needs.

Demo Model

Click on image below to activate demo - requires free Adobe Flash Player plug-in (www.adobe.com)

 

Contact info@decisionmodelling.com for further information.

 

Key Modelling Technique: Executive Dashboards
Modelling Software Used: Microsoft Excel, Optimising Portfolio Project Allocation ("OPPA")