The Decision Maker’s Dilemma
- Topics:
- Growth
- Tags:
- Acquisition,
- Project,
- Portfolio Decisions,
- Mergers & Acquisitions,
- Investment,
- Finance,
- Corporate Law,
- Business Performance,
- Business Operations,
- Projects
- Source:
- Portfolio Decisions
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Overview: Investment ideas can come from various sources: the exploration department proposes prospects, business development is on the lookout for acquisition candidates, and engineering evaluates development and acceleration projects. Ultimately, some process must be used to choose among available projects to construct a portfolio designed to meet the suite of business goals. The point here is not that acquisitions are superior to exploration, or that low NPV acquisitions are always desirable. Each portfolio is unique, and each set of targets and projects will interact in a unique way. The higher the hurdle, the more limited the choices. Projects’ importance to the portfolio is a function of interactions between projects. Specifically, the importance is partly a function of the goals one seeks to achieve, and partly a function of the other projects one has in the portfolio. This level of importance is often counterintuitive. Much can be learned about the projects and the corporate goals by investigating these interactions from a portfolio perspective. Project interactions affect the business performance of all oil and gas companies. However, portfolio management can provide the decision-maker with concise, quantitative business performance assessments for each investment decision. Portfolio management will reduce the decision-makers dilemma to selecting a preferred business performance option rather than just selecting investments.
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Format: PDF | Size: 51KB | Date: Jan 2003 | Pages: 8
