Risk Management in Transport PPP Projects
In the Islamic Countries
5
Table 1: Typology of risks affecting transport PPPs
Risk type Risk category Risks
Context-
related
risks
Political and
legal risks
Different investment preferences of alternating governments,
expansionary policies raising the cost of financing, risk of expropriation,
changes in law, corruption risk, fiscal risk
Macroeconomic
risks
Liquidity risk, exchange and interest rate risk, currency inflation
Project
risks
Financial credit
risks
Cost of financing, credit risk of the Special Purpose Vehicle (SPV), credit
risk of the construction and operating company, credit risk of the financial
institution, sovereign risk, transaction costs
Design,
construction and
operation risks
Site risks (availability of the site, permits, ground conditions),
construction costs, contractor failure risk, delays at various stages,
maintenance risk, environmental risk, technology risk, disruptive
technology risk, public acceptance, security risk, subcontractor
disputes/insolvency, renegotiation risk, residual value risk
Financial
sustainability
risks
Revenue risks (demand/usage risk - in user-pays and volume payment
mechanisms, price or tariff risk - in user-pays mechanisms, availability
and quality risks, third party revenue risks, etc.) and demand risks (traffic
volume, toll fee level, toll fee acceptability)
Other risks Force majeure and early termination risks
Source: Authors.
The different risks can be relevant at different investment phases and have different potential
impacts on the performance of transport PPPs, as will be seen through the presentation of each
phase. Risks may also mutually reinforce each other. Crucially, anyway, while every risk may
require a tailored approach and management, no one can be managed outside of an integrated
risk governance framework, which commands a holistic approach as the one adopted for the
study.
Risk management practices in OIC Member Countries
The factual analysis of the practices based on literature and/or the level of information collected
from the interviews with the representatives of the institutions involved in the development and
implementation of PPPs does not allow to comment on all different types of risks and sub-risks
by country and with reference to specific projects. This is partially due to:
 The limited availability of consistent information for all countries and projects
(including the fact that contractual documentation is generally not of public domain and
that risk matrices and guidelines on risk management are not available by specific country
and project);