Construction of a portfolio formation method by configuring project-candidates based on flow characteristics

Abstract

A method for portfolio formation, based on the logical methodological technique for configuring projects-candidates, which are represented by the S-curves of a cost flow and expected results, has been proposed. The application of the technique makes it possible to present a portfolio as continuously going processes of accumulation of potential attractiveness of different combinations of projects rather than a static totality of projects. Configuring has been shown to allow finding such a sequence of the mutual location of projects within a portfolio, in which the criterion, taking into account different types of the flow, reaches a maximum value. Using the S-curves makes it possible to account for changes in the indicators of flows that depend on the time of starting a project in the portfolio and affect its attractiveness. The developed model of portfolio formation, the system-creating factor of which is the configuring technique, revealed the relations between its structural elements, which made it possible to identify the essence of the criterial attractiveness indicator and a portfolio configuration criterion. In calculating attractiveness, the proposed technique for the S-curve coagulation procedure, which implies the discounting of cumulative flows, was used. This coagulation enables obtaining an integral indicator that takes into account the specific features of particular S-curves and opens up the possibility of using any type of flows in the problems of assessing and comparing projects and portfolios. Based on the attractiveness indicator and the use of a procedure for rationing the discounted cumulative flows, a portfolio-forming criterion has been developed. It was established that the criterion adequately reflects a greater attractiveness of projects with a decreasing character of costs and less funding time at the same parameters for the expected results. This fact has been proven by the results of computer simulation. In addition, it was confirmed that the constructed method makes it possible to take into account the strategic importance of a project, the specificity of a portfolio financing schedule, as well as the specific features in the character of changes in a project cost and the expected project result. © 2020, V. Rach, K. Abdulkadir, O. Medvedieva, O. Biriukov, O. Rossoshanskaya.