Chapter 5.6 provides a comprehensive overview of risk issues and the risk management cycle in PPP projects. During the appraisal process, risk identification and risk assessment are key tasks that provide inputs for constructing the financial base case for feasibility, for Value for Money (VfM) calculations, and for the initial consideration of risk allocation.
Risk identification (which is explained in detail in chapter 5.6.3) must be exhaustive during the Appraisal Phase, as a failure to thoroughly identify risks at this time may result in a flawed appraisal and subsequent project failure. It is therefore good practice to develop a comprehensive risk register during the Appraisal Phase.
Risk assessment includes both quantitative assessment to develop risk-adjusted costs (see section 4.4 below) and qualitative assessment for the purposes of the preliminary risk allocation (see section 5.2 below).