Risk and uncertainty can both impact infrastructure projects throughout delivery and operations. Responsible Agencies should assess what factors may be uncertainties in their projects. Infrastructure Australia's Guide to risk and uncertainty analysis6 provides tools that may assist Responsible Agencies to better understand and manage risks and uncertainties when developing a PPP or infrastructure project proposal. The tools include qualitative risk assessment, probability-based analysis, sensitivity analysis, scenario analysis and real options analysis. The approach may provide greater insight into the risks and uncertainties of issues such as cybersecurity risk, climate-related events and environmental impacts. TPP17-03 NSW Government Guide to Cost-Benefit Analysis7 (as updated from time to time) also provides guidance in relation to social, economic and environmental impacts.
Although commercial insurance provides coverage for most natural disasters, some risks cannot be quantified and therefore priced by the private sector. In these circumstances, it is generally unfeasible to transfer these risks to private sector parties and they may need to be retained by Government. When significant risks affect Government rather than the private sector, the Responsible Agency needs to play a more active role in defining minimum project characteristics to protect Government and taxpayers from extreme risk events, for example, limiting construction activity in flood prone areas or adopting more rigorous construction standards where a risk is identified and is assessed to warrant further direction8.
Responsible Agencies must satisfy themselves of their reporting requirements under Australian Accounting Standards Board (AASB) and other international standards for climate and sustainability related financial disclosures, and consistent with the requirements of the NSW Government Resource Efficiency Policy (GREP)9.
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7 Available at https://arp.nsw.gov.au/tpp17-03-nsw-government-guide-cost-benefit-analysis.
8 See https://ppp.worldbank.org/public-private-partnership/sites/ppp.worldbank.org/files/2021-08/PPP%20Reference%20Guide%20Version%203%20-%20PPP%20Basics.pdf.