Political context and PPP risk
management
Training event on risk management in PPP projects
26 May 2008
Twinning Project CZ/2005/IB/FI/04
Mikko AJ Ramstedt
Senior Project Adviser
Financial Partnerships Unit
Introduction
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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
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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
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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
Questions?
Mikko AJ Ramstedt
[email protected]
0131 244 4940