Quantifying the benefits of investment portfolio optimisation versus prioritisation for asset intensive organisations

摘要

Historically, many organisations have made investment decisions using a conventional ranking and prioritisation process. When prioritising, a fixed score is determined for each investment. This can be a measure of the investment's financial return (e.g. Net Present Value), or possibly a measure of the risk that the investment will mitigate for the organisation (risk score). During prioritisation, the portfolio of investments is ranked by that fixed score, and then those investments that can be executed within the budgetary constraints are selected. Mathematical optimisation using linear programming can improve on prioritisation results and achieve higher value outcomes whilst honouring multiple constraints (e.g. financial, service level, resources, timing, inter-project dependencies, and risk tolerances). Whilst individual organisations have reported significant benefits of using optimisation techniques these results are naturally specific to their operating context. This study seeks to generalise these results and quantify the value obtained by using optimisation techniques on portfolios of asset investments.