A Study On Project Portfolio Addressing Financial And Non-financial Factors

Nowadays investors often face many investment opportunities, but how to pick out projects appropriately is becoming a hot issue that investors concerned about due to the limited funds or other resources, where investing all projects is not allowed. In the traditional research of Project Portfolio, many scholars tended to evaluate project portfolio by discount rate and future cash flows. However, these methods have overlooked the uncertainties of project decisions. At the same time, previous research of Project Portfolio didn’t consider the impact of a single projects’ feasibility that non-financial factors and financial factors may affect, which resulted in that many projects’ surface incomes were very impressive, but in economic activity it was difficult or impossible to implement these projects. Meanwhile, there are many risk factors in the investment process, including non-financial factors and financial factors, and the previous studies often ignore the impact of non-financial risk in selection decisions results. To solve these problems of existing researches, the contents of this paper includes the following aspects:1. Taking into account the impact of non-financial factors on the feasibility of projects, the paper established a non-financial evaluation index system of venture investment projects, and gave projects’ triangular fuzzy rating in different non-financial factors by the experts’ scoring method, then calculated the weights of each non-financial factor and the scores of each project in the non-financial situation using fuzzy AHP method, which were compared with the threshold value given by experts, and so that investors could determine the feasibility of a single project in the non-financial situation.2. Taking into account the impact of non-financial factors on the feasibility of projects and uncertainties of investment returns, for venture investment projects which was feasible under the non-financial situation, the paper assumed that net cashes in future phases were triangular fuzzy numbers, and using the credibility mean and variance, we established expected income indices and risk indices of each project based on Present Value Index. At the same time, investors could determine the feasibility of a single project in the financial situation through that the credibility means of fuzzy present value index were compared with3. Taking into account the impact of financial factors on multi-project portfolio,under limited funds and some relation constraints among projects, with a assumption that all projects were one-time investment, risk assessment indicators were defined as a number that the credibility variance of fuzzy present value indexes divided by the credibility means of fuzzy present value indexes, and the paper established a new objective function considering both the size of investment incomes and the level of risk, in order to obtain the optimal portfolio., In addition, the paper also discussed the project portfolio under the probability constraint of bankruptcy.4. Taking into account the impact of non-financial factor on multi-project portfolio, due to market and environment, projects’ management team, technology and products, it is unscientific to ignore non-financial risk in the multi-project portfolio modeling. Therefore, the paper measured the projects’ non-financial risk by entropy method, and established a function between a compensation risk rate and entropy, introducing non-financial risks. At last, a new multi-project portfolio model considering non-financial risks was proposed, improving applicability of the model.