“Rank and yank” is a common method to select projects for a portfolio. For portfolios of projects that generate financial value, net present value (NPV) is typically used for ranking. This method cannot account for multiple constraints (e. g., investment, people resources, etc.) and is primarily based on deterministic NPV values. In this session, we will examine a superior, novel technique called stochastic optimization that overcomes these limitations and offers many other advantages.
At the conclusion of this session, participants should be able to:
- Demonstrate that stochastic optimization identifies the highest NPV-yielding portfolio with the right project mix accounting for multiple constraints including resources.
- Analyze results from a hypothetical portfolio to compare stochastic optimization with other commonly used methods to show its superiority.
