Keflavik Paper Company
Question 1
Project portfolio management is the systematic process of selecting, supporting, and managing a firm’s col- lection of projects. Projects are managed concurrently under a single umbrella and may be either related or independent of one another.
1. Keflavik Paper presents a good example of the dangers of excessive reliance on one screening technique (discounted cash flows). How might excessive or exclusive reliance on other screening methods discussed in this chapter lead to similar problems?
Some measures that allow us to screen projects may lead to the wrong conclusions; for example, suppose that we selected projects in construction settings for their aesthetic appeal and ability to promote our name across the industry. If insufficient attention was then paid to issues such as cost of the project or safety concerns, we may be selecting projects that will ultimately damage our reputation or drive us out of business. Company should probe various screening techniques for their strengths and weaknesses to ultimately demonstrate that effective screening methods usually rely on multiple, complementary measures for selecting projects.
2. Assume that you are responsible for maintaining Keflavik’s project portfolio. Name some key criteria that you believe should be used in evaluating all new projects before they are added to the current portfolio.
Among the criteria I could list are:
Realism:
An effective model must reflect organi- zational objectives and must be reasonable in light of such constraints on resources as money and personnel. Finally, the model must take into account both commercial risks and technical risks.
Capability:
A model should be flexible enough to respond to changes in the conditions under which projects are carried out and robust enough to accommodate new criteria and constraint
Flexibility:
The model
should be easily modified if trial applications require
changes.
4) cost of development.
The cost of gathering, storing, and arranging information in the form of useful reports or proposals should be relatively low in relation to the costs associated with implementing a project (in other words, low enough to encourage use of the models rather than diminish their applica-bility).
