•  Demand/volume

•  Revenue

•  Environmental/archeological

•  Regulatory/contractual

•  Payment structure/mechanism

•  Transaction cost

•  Construction cost

•  Maintenance cost

•  Life-cycle cost

•  Liability/latent defects

•  Compensation and termination clauses

•  Changes of law

•  Economic shifts

•  Currency/foreign exchange

•  Taxation constraints

•  Moral hazard

•  Loss of control of assets

•  Political stability

•  Protectionism

•  Public acceptance

Risk Category

Description

Consequence

Mitigation

Site Conditions

•  Existing
structures may be
inadequate.

•  Contamination
of site.

•  Necessary
approvals may
not be obtained.

•  Additional
construction 
costs and time
delays.

•  Clean up costs.

•  Commission studies
to investigate 
suitability of site and
structures

•  Private sector to
incorporate risk 
through 
refurbishment during
construction phase.

Design,
Construction
and
Implementation
Risk

•  Facility incapable
of delivering at 
the anticipated 
costs.

•  Physical or
operational
implementation 
tests cannot be
completed

•  Increase in
recurrent costs,
delays.

•  Delayed/lost
revenue.

•  Seek reputable
constructors with 
strong financial
credentials.

•  Private party may 
pass risk to
builder/architects 
while maintaining 
primary liability.

•  Link payments to
progress.

Financial

• Interest rate risk.

•  Financing
unavailable.

•  Contingent
funding
requirements

•  Increased 
project cost.

•  Non - 
completion of
construction.

•  Interest rate hedging.

•  Financial due 
diligence.

•  Bank/capital
guarantees from 
finance companies.

Operating

•  Inputs,
maintenance may
yield higher costs.

•  Changes to
government
requirements with
respect to facility
operations.

•  Increase in
operating costs.

•  Adverse effects
on quality and 
service 
delivery.

•  Long-term supply
contracts where
quality/quantity can 
be assured.

•  Upfront specification 
by public sponsoring
agency.

Market

•  Fluctuations in
economic activity 
on demand

•  Competition,
demographic 
change and 
inflation.

•  Lower revenues.

•  Diminution in 
real returns to 
the private party

•  Private operator to seek
an availability payment
element to minimize 
impact on risk premium.

•  Review likely 
competition for service 
and barriers to entry.

Legislative

•  Additional
approvals required
during the course 
of the project 
cannot be 
obtained.

•  Changes in laws
and regulation

•  Further
development or
change in 
business 
operation may be
prevented.

•  Increase in operating costs with regards to complying with new laws

•  Private sector to
anticipate requirements.

•  Public sponsor may
mitigate such change by
monitoring and limiting
changes which may 
yield adverse
consequences.

Asset Ownership

•· Loss of the facility upon premature termination of lease or other project contracts upon breach and without adequate payment.

•  Different residual value to that originally calculated

•  Loss of
investment of 
private party

•  Possible service
disruption as
additional capital
costs incurred to
upgrade the asset 
to the agreed 
value and useful 
life.

•  Private party will be 
given cure rights to 
remedy defaults.

•  Public sponsor may 
make payment for value 
in the project on a cost 
to complete basis if
termination occurs pre -
completion.

•  Impose on the private
party maintenance and
refurbishment 
obligations.

•  Secure services of a
reputable maintenance
contractor, with strong
financial credentials.