Background: Risk management is an important element in project portfolio management; however, it is not widely practiced in the organisations due to the associated time and cost to the processes and lack of interconnection between different projects within project portfolios. 

Objectives: The aim of this study is to analyse different parameters affecting the quality of the risk management within projects and project portfolios, and how the risk management quality is related to the firm performance. 

Methodology: A quantitative approach has been used for the data collection and analysis. The hypothesis proposed has been tested using structural equation modelling. Thirty-one respondents taking part in the online survey occupied positions as project portfolio managers, project leaders, and engineers. Two parameters in the model concerning cultural differences and firm performance were quantified by cultural distance measure and data envelope analysis. All data gathered has been analysed using SMART PLS 3 software.

Results: The results of our study illustrated that three out of four proposed hypotheses are significant. These are the proposed relationship between risk management and risk management quality, risk management quality and firm performance, and risk management quality and resource allocation. The proposed relationship between cultural differences and risk management quality was nonsignificant.

Conclusions: The findings in our study confirms the positive effect of the risk management quality on firm performance and the parameters that can improve the risk management quality. This would serve the organisation to withstand their cost benefit analysis while implementing risk management in project portfolios.

Recommendations for future research: Our approach was exploratory and limited to thenumber of firms participated in our survey. Future research might benefit from application on the same approach in the case studies considering individual firms or firms within the same branch.

Keywords: Risk management, Project portfolio management, Firm performance, Structural equation modelling