The concept of planning fallacy was proposed by Nobel laureate Daniel Kanhemann. Our plans are influenced by two schools of thought – one where we think intuitively and rapidly and the second where it is slow and rational. Also decision bias and the tendency of project managers to hold onto irrelevant information also results in planning fallacy. The best solution in such cases is to seek expert intuition. For expert intuition to be successfully implemented , an organised structure in a regular world needs to be in place and the decision makers must have gained expertise through feedback. Hence having an expert and implementing his feedback is key to the success of any project. Project managers must follow the Plan Do Check Act (PDCA) cycle to weed out any chances of planning fallacy and decision bias.
At the portfolio level, the PDCA cycle involves risk and contingency assessment at several levels. The key areas are Strategic Management of existing assets and the individual Project Control cycle processes. The representation below indicates the flow of above control processes during the project life cycle.
Also, implementing the above controls at a portfolio effect reduces the risk levels at individual projects as learnings from one project can be implemented in another. The purpose of risk management is to create and protect value ( social ,economical, environmental ) derived from an individual project and from the portfolio as a whole.
Finally, the effectiveness of the risk management process should be evaluated by continuously measuring the KPI fulfillment levels at project & portfolio levels and also continuously evaluating the risk and contingency allocated at project & portfolio levels.