1-  Introduction

The following is a review of the standard methodology used to develop risk matrix that will enable the federal entities sponsoring the PPP projects to evaluate, distribute and manage the major risks involved in the proposed project.

Risk analysis is a fundamental factor and essential component in evaluating the PPP project comprehensive feasibility in the applied study. In addition, the determination and evaluation of risks are a paramount part in defining the value for money.

This matrix will help the federal entities sponsoring the PPP to complete three basic tasks: 

  Development of matrix to be used as a guide while preparing a feasibility study for a proposed project. 

  Application of a standard risk assessment methodology 

  Assistance in developing an official methodological strategy for risk management before negotiating with the private partner to rationalize the process of risk distribution.

Risk matrix is always developed or prepared to illustrate the following items:

a- Description of the risks involving a major threat

b- Possibilities of each separate risk

c- Economic effect

d- The options available to reduce risks and mitigate their consequences

e- Distribution of risks/distribution of the responsibilities of dealing with risks 

f- Determination of the factors that may affect service in terms of its demand, occurrence of human or technical defects or any other organizational obstacles.

It is necessary to review and consider the risks of each project separately because the risk matrix and the risk distribution method differ from project to another.

In general, risks are assessed through seven steps:

The first step: Identification of the risks involved in the project

The second step: Determination of the consequences resulting from such risks

The third step: Estimation of the each risk possibility

The fourth step: Calculation of each risk costs

The fifth step: Identification of the entity responsible to deal with such risks

The sixth step: Development of risk matrix

The seventh step: Identification of the strategies aiming at reducing risks and mitigating their effects.