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 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 PriceTime

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

Mikko AJ Ramstedt Questions?