September 24-26, 2014 Krakow, Poland Risk Mitigation in RBF Schemes

 Careful evaluation of unit cost at design stage  Create mechanism to adjust payments or unit cost variations that cannot be passed through  Sound market and demand studies (due diligence)  Awareness building of beneficiaries (e.g. communication campaign)  Manage SP cash flow with proper linking of outputs with disbursements  Use fiduciary agent to disburse subsidy payments instead of Government agency  Mitigate through evaluation of government’s and local authority commitment and track record  Purchase of political risk insurance  Mitigate through evaluation of government’s and local authority commitment and track record  Purchase of political risk insurance Evaluating and Mitigating Project Risks Performance Risk: Payment Risk: Risk Mitigation Demand Risk: Unit Cost Change Risk: 2 Regulatory Risk: Collection Risk Political Risk:  Independent verification controls disbursement if unmet performance, but dependent on IVA quality  Capacity building of SP prior to implementation  Independent verification controls disbursement if unmet performance, but dependent on IVA quality  Capacity building of SP prior to implementation  Willingness-to-pay surveys and factor in risk in project design  Pre-payment or deposit required for service  Assess through due diligence of regulator’s experience and track record as well as clarity of regulation

Clinic #3: Risk Assessment and Mitigation Task: Assess the risks associated with your initiatives and discuss mitigation strategies. Time: 45 min – preparation 45 min – team presentations and discussion