Benchmarking project portfolios using optimality thresholds

Risk assessment and selection of project portfolios are carried out under uncertainty, since this process uses historical data that can be adjusted in the future. The problem is whether the decision is still favorable and the level of risk is still acceptable to the investor. Assessing the quality of alternatives provides additional information about robustness to any changes in the parameters of the problem. The paper describes the concept of accuracy function. Using this concept, portfolios are evaluated to determine which portfolio is more robust with a possible increase in the level of risk. When the risk is reduced, the accuracy function indicates the optimality threshold when the selected portfolio can become Pareto optimal. This helps the investor to better assess the market situation and make more rational investment decisions. Based on the global risk assessment from the World Economic Forum report the case study describes the use of the accuracy function in assessing investment portfolios of projects participating in the Belt and Road initiative. The results show improvement paths to make economic arias more investment friendly. (C) 2019 Elsevier Ltd. All rights reserved.

Automated summary

Risk assessment and selection of project portfolios are conducted under uncertainty, using historical data that can be adjusted in the future. By evaluating the robustness of portfolios with an accuracy function, investors can better assess market situations and make more rational decisions. Based on global risk assessment, the accuracy function is used to improve investment portfolios in projects participating in the Belt and Road initiative.