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CHAPTER 9.3

PROJECT SELECTION AND RISK

Risk Management Is an Essential
Part of Project Portfolio Management

A popular subject for the start of the new millennium is Project Selection. As
we move toward the management of multiple projects within the enterprise,
we are often faced with insufficient capital and human resources to engage in
every project opportunity. So a process is put in place to govern the selection of
projects for the portfolio. Yet, much to my disappointment, a key component of
this selection process is often missing. The selection team fails to consider risk.

As a practitioner and proselytizer of project management for 40 years, I have
been puzzled by this above all others. Why is risk management virtually ignored
as an integral part of the project selection and management process? We all rec-
ognize that risk is an important part of all projects. If we thought about it, we
would all acknowledge that the management of risk could be the most critical fac-
tor in project success. Yet as I look at the practices that have been put in place in
most firms, and at the tools that are being used to support these practices, risk
analysis and management are most often missing.

It’s not as if the processes and tools were not available, but more of a major
lack of interest in the process. I can provide two stories that might help to explain
the perilous avoidance of this essential practice.
The Downside Won’t Happen
A company decided to enter into a new business segment. As was standard prac-
tice for this well-managed conglomerate, a business analysis plan was prepared to

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