Critical in developing PPP projects is how to mitigate risks which have been identified in the above screening process. Risks refer to the "quantifiable likelihood of loss or less than expected returns" in investment.
Managing risks require its allocation or mitigation. This is the process of formulating strategic policies or making policy adjustments for the benefit of the private sector partners in the PPP scheme. The aim of risk allocation or mitigation is to minimize project risks on the side of the private sector partners, which would otherwise be 'passed on' to service users through higher costs. By making risk burdens lower for the private sector, the cost of accessing a particular service being provided by the PPP project would not be transferred to the users, hence, ensuring affordability. Risk allocation is done through clearly specified contractual warranties or assurances such that when a specific event occurs, the party who would bear the economic consequences is clearly identified.
The tables in the succeeding sections illustrate the typical risks embedded in every stage of a PPP project life.