Portfolio Management Tools

Portfolio Management Tools Portfolio management (PM) tools assist the portfolio managers in achieving the optimum balance between attractions and drawbacks, stability and growth, and risks and returns by making the good use of limited resources available. They provide the organized and systematic ways for analyzing the set of projects or activities.

Common Aspects of PM tools

There are certain common aspects of various Portfolio management tools.

· The results obtained by the assessment of individual projects in a portfolio are balanced with PM tools.

· Portfolio Management can be combined with suitable evaluation techniques of single project.

· PM utilizes the results of the analysis (partially or completely) done for evaluating the individual projects when used for selecting or assessing the projects.

· The projects do not occur during the same period of time when PM tools are applied therefore there are some discontinuities.

· One of the main tasks of PM tools is to balancing the projects on time in terms of costs and returns over time.

· In order to ensure the uniformity and validity of the input data, it is imperative to examine every project in a similar way. It is necessary for the balancing of the projects.

Popular Portfolio Management tools

There are many project evaluation tools that can be applied to portfolio evaluation techniques

by making direct comparison of the assessment results of individual projects. In addition to these, there are certain techniques that are designed specifically for PM.

2D and 3D matrices

It is based on the graphical representation of many variables in 2 or 3 dimensional matrices

Variables, important to the decision-maker are preferred

Discussion is encouraged for arriving at the decision

Mathematical programming

It is based on the complex mathematical algorithms

It is targeted at optimization of the portfolio

Requires computer support

This cannot be easily adapted to various companies and conditions as it is company specific

They are used for devising the solution like selection of the projects for investments

Others Tools

Others tools are used primarily for project evaluation such as decision tress and others

2D and 3D matrices

The 2D and 3D matrices are used for the analysis and representation of business units, projects or activities on the basis of 2 or 3 meaningful variables. All these matrices need a similar process for taking decisions and analysing the data. They are considered to be complementary and hence they are grouped together.

The portfolio is analysed by business and RTD managers by examining each individual project. It is followed by placing each project within portfolio matrices that incorporates the strategic elements that are critical to the particular company and its industry.

The2D and 3D matrices techniques are suitable for any company and context and therefore they are very popular and interesting. They are easy to implement and compared with other techniques.

These matrices offer a framework for assessment of various parameters, and company should do some experiments for applying these tools for finding the suitable combinations. These matrices require the judgement and these judgements are supported by using these PM tools.

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