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Calculating the Risk to Net Value in a Portfolio

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In the Portfolio Optimizer, the Risk to Net Value indicator measures the Potential Risk taking into account the Net Value provided by all projects displayed in the Portfolio Optimizer. 

For achieving the most efficiency within the portfolio, you want to see that the Risk indicator is low and the Net Value indicator is high. 

The Risk and Net Value indicators are represented from the perspective of how they relate to each other. Depending on which Portfolio Optimizer you are using, the Risk to Net Value metric is calculated differently:

  • Portfolio Optimizer
    • The Risk indicator is calculated by the following formula:
      Risk indicator = Risk / (Risk + Net Value)
    • The Net Value indicator is calculated by the following formulas:
      Net Value indicator = 1 - Risk / (Risk + Net Value)
      Or
      Net Value indicator = Net Value / (Risk + Net Value)
  • Legacy Portfolio Optimizer
    • The Risk indicator is calculated by the following formula:
      Risk indicator = Risk / (Risk + Legacy Net Value)
    • The Net Value indicator is calculated by the following formulas:
      Net Value indicator = 1 - Risk / (Risk + Legacy Net Value)
      Or
      Net Value indicator = Legacy Net Value / (Risk + Legacy Net Value)

      IMPORTANT If you are in the Legacy Portfolio Optimizer, the Net Value is calculated using the Legacy Net Value in the Legacy Resource Estimates area of the Business case.

      For more information, see "Calculating Net Value."

      (also update the "Calculating Net Value" article) 

NOTE The Risk to Net Value indicator calculates based on the projects that you display in the Portfolio Optimizer, and not on all the projects which are associated with the portfolio. 

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Linked to Understanding the Portfolio Optimizer.

 

This article last updated on 2018-07-18 15:31:16 UTC