Risks are inherent in all PPP projects as in any other infrastructure projects. They arise due to uncertain future outcomes which may have direct effect on the provision of services by the project, and/or the commercial viability of the project. The risk allocation to parties in contract and the management of risks are, therefore, at the heart of a PPP design. This is also an important element in establishing the business case for a PPP project.
The risk analysis, allocation and management involve the following activities:
• Identification of all possible risks and assessing their likelihood;
• Examining the likely effects of the risks in quantitative and qualitative terms;
• Consideration of suitable mitigation measures that may be available; and
• Allocation of risks to parties.