Monitoring and managing risks vital in PPP projects

In Asia, including in India, risk management issues arise in public-private partnership (PPP) projects. If the risks associated with a PPP project are not regularly monitored and managed, it may delay the implementation of the project, increase the cost of the project, create a shortfall in performance and could also make the project unviable.

The project risks – design, construction, operation and maintenance, land, environmental, consents and approvals, time lines, change in law, financing, revenue, etc. – are usually identified in the PPP contracts, and are contractually shared between the parties. Typically, risks are allocated to the party best suited to absorb the implications and to mitigate them. Then there are risks which are inherent to the parties and other risks which are not contractually allocated.

To implement a PPP project successfully, the parties have to continuously monitor and manage project risks during the entire term of the project. The monitoring and management of project risk is most critical during the construction phase and the initial operation phase. One of the ways of doing this is through an independent project manager.