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Political context and PPP risk management
Training event on risk management in PPP projects26 May 2008
Twinning Project CZ/2005/IB/FI/04
Mikko AJ RamstedtSenior Project Adviser
Financial Partnerships Unit
Introduction
• Background
• Managing risk in a political context
• Dealing with unrealistic time pressure
• Creating contingencies for public sector risk
Background
• QUESTION:
– What risk are normally public sector risks?
Background - Political Risks
• Issues quite often ‘Show-Stoppers’ in nature
• Difficult to anticipate and manage
• Increase with the number of authorities involved
Managing risk in political environment 1
• Consultative project development• Building clear benefits / outcomes case• Active management of controversial elements• Creating clearly defined and well understood
legal parameters should be agreed before contract close
• Risk register and management strategy should be agreed before contract close
Managing risk in political environment 2
• Establishing clear sign off procedures– Senior level ownership of risks– Regular & structured liaison at political level
• Agreed format & reporting cycles• Awareness of key risks
– Continuous project steering arrangements
• Proactive risk management
Dealing with un-realistic time pressure 1
Quality
Price Time
Dealing with un-realistic time pressures 2
• 30 year contract – need to get it right!
• Clear project timetable & critical path
• Management role of Project Board / Steering Group
Creating contingencies for public sector risk 1
• Risks = time & money
• Planning to fail – optimism bias!
• Shared timetable
• Sensitivities - Identify critical path and cost drivers
• Realism over costs
Creating contingencies for public sector risk 2
Mitigation:
• Take preventative action!
• Don’t start procurement too early
• Define & agree processes with public stakeholders
• Prepare an affordability management strategy
Summary
• Public sector risks need to be clearly understood by all stakeholders
• Risk register and management strategy must be signed off at steering group level
• Relationship between Time, Quality & Price
• Building contingencies is about being equipped to deal with the worst case
