A key capacity that will need to be developed among municipal leaders is the understanding of and ability to effectively allocate risk. Inexperienced municipal actors fail to recognise that all partnerships involve some risk, especially long-term partnerships, and that these risks need to be allocated fairly if partnerships are to remain viable. The key rule reiterated by specialists is that risk should be allocated as far as possible to the party best able to handle it.
Chapter 7 has detailed some of the primary factors in relation to construction, operation and maintenance, political, revenue and regulatory risks. In order to achieve an appropriate level of capacity in relation to risk management it is necessary to ensure that the principles are understood, that the municipality understands the key risks affecting the performance and decisions of all actors involved in the partnership, and that the very different risks of different forms of contract have been recognised.