| Risk Category | Description | Consequence | Preferred allocation | Mitigation |
| Sponsor risk | ||||
| The risk that after execution of contracts the private party is found to be an improper person for involvement in the provision of the contracted services. | Possible cessation of service to Government, management crisis, and/or forced change in ownership. | Government. | Government can mitigate this risk by assessing the probity of the private parties and their sponsor when evaluating the bids.Further the contract will generally have provisions allowing Government to ensure continuity of physical delivery of essential services. | |
| Financial | The risk that after execution of contracts the private party becomes insolvent or financial demands on the private party or its sponsors exceed its or their financial capacity causing corporate failure. | Possible cessation of service to Government, forced change in ownership and/or possible corporate failure causing financial loss to Private party. | Government ultimately bears this risk because it can affect the provision of adequate public services. This is despite the fact that Government would have the right to terminate the private party in such circumstances. | Government may mitigate this by ensuring the project is financially remote from external financial liabilities, ensuring adequacy of finances under loan facilities or sponsor commitments supported by performance guarantees; and by due diligence on private parties (and their sponsors). Contractual provisions will allow the Government to ensure continuity of physical delivery of essential services. |
| Technical | The risk that the private party is unable to deliver the required infrastructure and/or operational systems in the required timeframes. | Non-delivery or cessationof service to Government. | Government ultimately bears this risk because it can affect the provision of adequate public services. This is despite the fact that Government would have the right to terminate the private party in such circumstances. | Government will mitigate this risk by assessing the experience and technical competence of the private party to deliver the required infrastructure and operational systems. Contractual provisions will allow the Government to ensure continuity of physical delivery of essential services and to abate service payments for non-performance. |
| Operational | The risk that the private party is unable to effectively manage the service delivery operations. | Cessation or reduced quality of service to Government. | Government ultimately bears this risk because it can affect the provision of adequate public services. | Government can mitigate this risk by assessing the experience and competence of the private party to manage and deliver the required services. Private party may be required to provide performance guarantees during the operation phase. Contractual provisions will allow the Government to ensure continuity of physical delivery of essential services and to abate service payments for non performance. |
| Change in ownership | The risk that a change in ownership or control of the private party results in a weakening in its financial standing or support or other detriment to the project. | Government assurance of the financial robustness of the private party may be diminished and, depending on the type of project, probity and other non-financial risks may arise from a change in ownership or control which may be unacceptable to Government | This is generally a shared risk in the sense that the Government will bear the risk that the change in ownership has an adverse effect on the project and the private party bears the risk that the revised structure inhibits its ability to perform the project leading to termination. | Government can mitigate this risk by requiring its consent prior to any change in control |