Political and financial risks and their mitigation measures in public private partnerships

Abstract

Public Private Partnerships (PPPs) are a popular alternative for public infrastructuredelivery in many countries. Despite of many proven successes, there are a number of failure cases in almost every country and every sector. PPPs involve complex contractual relationships among multiple participants over a long concession period. Various risks may be encountered over this long concession period, which could lead to the failure of a PPP project. Effective mitigation of such risks would overcome problems that might cause the failure of a PPP project. Political and financial risks are two types of common risks in PPP projects. This study explores political and financial risks and their mitigation measures. First, key political and financial risk factors and their mitigation measures have been identified through intensive literature review and expert interviews. Second, the significance of political and financial risk factors and the effectiveness of their mitigation measures have been examined through an international questionnaire survey of PPP experts. Third, detailed statistical analysis has been conducted to analyze the responses to the questionnaire survey. This analysis has determined the relative significance of the various political and financial factors and the relative effectiveness of the mitigation measures for each risk factor. Outputs of this study would be useful for future PPP projects by addressing key political and financial risk factors with effective mitigation measures. This would increase the chance of the success of PPP projects.

Date of Award	2012
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology