One of the essential conditions of a PPP, as described in Module 2 of this Guide is 'Risk Sharing'. Appropriate risk sharing between the parties in a contract is key to determining, the project structure and also the private sector's response to a bid. Well-developed projects identify risks up front, and accordingly design the institutional arrangements, the financing package, and the contractual agreements to best mitigate and manage those risks. Risks vary across project type and location.
| Risk Analysis answers: • What are the risks associated with the project? • How can those risks be mitigated? • How best can the risks be allocated between the public entity and the private partner? |
At various stages in the project lifecycle, the potential risks should be listed and described, based on the project concept, the scale of required investment, and the past performance trends of the sector. While analysing the risks, the constraints and benefits of public and private delivery systems should also be considered. Altogether, the risk analysis provides a realistic project scope and explains what the major challenges are for implementation.