Analyzing Risk Interaction Effects among IT Projects based on Modern Portfolio Theory

Financial Services Providers usually conduct multiple concurrent IT projects and have to constantly allocate their resources on the projects in an efficient way. Naturally, they may realize cost synergies among projects – e.g., due to infrastructure sharing – depending on the projects’ resource requirements. However, exploiting resource interactions leads not only to cost synergies but also to risk interaction effects. We propose a conceptual model based on the Modern Portfolio Theory to study these risk interaction effects among IT projects. The main contribution of this research is the conceptualization of the effects of resource interactions on the risk of a Financial Services Provider’s project portfolio. Thereby, we illustrate that realizing cost synergies may not only lead to risk accumulation effects but, counterintuitively, also to risk reduction effects.