H.1.1 What is risk?

In the context of infrastructure projects, risk has been defined as 'the chance of an event occurring which would cause actual project circumstances to differ from those assumed when forecasting project benefit and costs.'1 Risk is at the core of project profitability (for the private party) and efficiency (in delivering public sector objectives). Management of risks holds the key to project success or failure because 'projects are about risks … their evaluation and their subsequent acceptance or avoidance'.2

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1 Chris Furnell, 'Risk identification and risk allocation in project finance transactions', paper presented at the Faculty of Law, The University of Melbourne, May 2000, p. 1.

2 Allen & Overy, from Furnell, ibid., p. 3.