Syndicate content

Risk Management

Risk in Vienna City Hall

Joaquin Toro's picture
 
The Vienna City Hall (Rathaus) is one of the landmarks of the Austrian Capital. Visitors are amazed by its Gothic architecture and magnificent interiors - which are famous for hosting lavish events and balls. However, perhaps in direct contrast to these types of events, the Wappensaal of the Rathaus hosted the first ever Understanding Risk Austria event.

Where in the 18th century these halls hosted the Viennese bourgeoisie, in January these halls now received disaster risk management professionals, decision makers, policy makers, technical institutions, and representatives from the private sector, NGOs and academic institutions from around Austria to discuss disaster risk management issues in the country.

This demonstration of support for GFDRR and the Understanding Risk brand was an important step in further integrating the rich experience of DRM that Austria offers the global UR community.
 

Flood risk in dry Ulaanbaatar of Mongolia? Really? Really

Artessa Saldivar-Sali's picture
Making Ulaanbaatar More Resilient to Floods

After growing up in Manila, one of the densest and most cyclone-prone cities in the world, I expected my first visit to Mongolia to be filled with vast plains and blue skies. The plains and skies did not disappoint – but I quickly learned that Ulaanbaatar, the country’s capital, is a city that is rapidly becoming like many other cities where I have lived and worked.
 
There is the unmistakable buzz of a place that is growing, and growing fast.  People move to Ulaanbaatar from the countryside for the opportunities that open up to them, with the city now home to nearly half the country’s population. It is becoming more cosmopolitan every time I go – there is even a Cuban restaurant with a Cuban chef. And, like many other cities in Asia, Ulaanbaatar has floods.
 
Out of the 34 floods recorded from 1915-2013, about 60% occurred from 2000-2009. The 1966 flood stood out in collective memory as being the last “big one.” Yet in 1966, Ulaanbaatar only had a population of over 200,000, now it has over 1.3 million people.  

One question, eight experts, part six: William Dachs

William Dachs's picture

To gain a better understanding of how innovation in public-private partnerships (PPPs) builds on genuine learning, we reached out to PPP infrastructure experts around the world, posing the same question to each. Their honest answers redefine what works — and provide new insights into the PPP process. This is the question we posed: How can mistakes be absorbed into the learning process, and when can failure function as a step toward a PPP’s long-term success?

Our sixth response in this eight-part series comes from William Dachs, Chief Operating Officer of the Gautrain Management Agency in South Africa. 

South Africa's Gautrain.
Photo: Wikimedia Commons

The ability of a national PPP program to apply lessons learned from one project to the next is dependent on factors such as the documentation of case studies and the use of a central repository of information in a PPP unit at the national level, where such lessons can be distilled and applied to the next project in that jurisdiction.

There are plenty of good examples of such programs that learn from and apply lessons. But how are individual PPP projects able to absorb mistakes and still meet the original objectives of value for money for the users of the services and the taxpayers who may ultimately bear the risk of the project failing?

It is impossible to predict the range of possible risks and to allocate these with precision over 20 to 25 years in a complex and changing environment. As such, the key to achieving long-term value from a PPP does not only lie in the quality of the feasibility and procurement phases, but also in how the balance of risk and rewards is established and applied in the PPP contract so as to be able to survive significant changes over a long period of time.

One question, eight experts, part four: Richard Abadie

Richard Abadie's picture
Photo: Wikimedia Commons

To gain a better understanding of how innovation in public-private partnerships (PPPs) builds on genuine learning, we reached out to PPP infrastructure experts around the world, posing the same question to each. Their honest answers redefine what works — and provide new insights into the PPP process. This is the question we posed: How can mistakes be absorbed into the learning process, and when can failure function as a step toward a PPP’s long-term success?

Our fourth response in this eight-part series comes from Richard Abadie, who leads the Capital Projects and Infrastructure Group at PwC

Having worked in the infrastructure sector for nearly 20 years, I’ve had time to reflect on what success and failure look like in infrastructure PPPs. Mistakes have been, do, and will continue to be made when using PPPs. It is not perfect — nor is its application — but what in life is?

There are so many horror stories around non-PPP construction cost overruns, delays in completion, poorly specified contracts, weak tender management, corruption, failure to run transparent competitive processes, lack of project readiness, significant post-contract variations, and sporadic asset maintenance and management. PPPs eliminate many of the above structural weaknesses, which rightfully earns it its place as a challenging but effective procurement approach.

The chief criticisms of PPP — that it takes longer to procure and is less flexible than conventional procurement — have some validity. Getting price certainty does take time and requires clear contractual risk allocation through the life of the contract.

Protecting Your PPP: Stabilizing partnerships in uncertain times

Waleed Youssef's picture
Uncertainty is inherent in developing and operating complex infrastructure and services projects, and it is for this very reason that government officials seek public-private partnership (PPP) partners to mitigate the most complex of risks. Yet legal and regulatory frameworks, in place for legitimate reasons (especially in emerging markets), often dampen the private sector’s ability to address in an optimal manner the challenges that can and often do arise during the term of a concession.

It is important to distinguish between projects that exceed expectations — and therefore generate greater than expected financial returns to both parties, yet require additional, unanticipated capital investments — and struggling projects where there is an urge by the developer to reduce ongoing investment and maintenance.
 
Istanbul Ataturk Airport. 
Photo: Wikimedia Commons

“Successful PPPs are all alike…”
To paraphrase Tolstoy, successful PPPs are all alike, but every unsuccessful PPP is unsuccessful in its own way.

Successful projects are easier to manage owing to positive cash flows, and could additionally incorporate an obligation by the developer to increase its investment according to certain capacity-related triggers on the basis of floor and ceiling for project returns. This could also be supplemented by sponsor commitments to co-investment or to extend the concession terms based on minimum returns, as well as a sponsor sinking fund to ensure independence from the uncertain and tedious public budgeting process. Very often, concession agreements focus on what to do when things go wrong, but not how to continue to meet demand when things go well, especially toward the end of the concession term.

One question, eight experts, part three: David Bloomgarden

David Bloomgarden's picture

To gain a better understanding of how innovation in public-private partnerships (PPPs) builds on genuine learning, we reached out to PPP infrastructure experts around the world, posing the same question to each. Their honest answers redefine what works — and provide new insights into the PPP process. This is the question we posed: How can mistakes be absorbed into the learning process, and when can failure function as a step toward a PPP’s long-term success?

Photo: Wikimedia Commons

Our third response in this eight-part series comes from David Bloomgarden, Chief of the Basic Services and Green Growth unit of the Multilateral Investment Fund of the Inter-American Development Bank.

U.S. General George S. Patton famously said, “Take calculated risks. That is quite different from being rash.” This quote summarizes how countries should absorb risks into the learning process of a public-private partnership program.

Governments know that complex projects never go exactly as planned. PPPs are among the most complex of all infrastructure projects, because they involve multiple stakeholders in the public and private sectors and tend to be used to procure large infrastructure. Starting a new PPP program requires that governments learn to master the regulatory, institutional and technical challenges involved in planning, designing and implementing a PPP.

Few governments — and especially those of developing economies — can afford failure in the delivery of critical infrastructure and services given the scarce resources and enormous human needs.

#10 from 2014: Managing Risk for Development – Through a New World Bank MOOC

Sheila Jagannathan's picture
Our Top Ten blog posts by readership in 2014.
This post was originally posted on June 23, 2014

 

In the past two decades while the world has experienced global integration, technological innovation, and economic reforms, there has also been financial turbulence and continuing environmental damage. As the world changes, a host of opportunities are constantly arising, and with them, appear risks both new and familiar. These risks range from the possibility of job loss and disease, to the potential for social unrest and natural disasters. This is the topic of a new World Bank Group MOOC illustrating how risk management can be used as a tool for development by helping to minimize crises but also unlocking important opportunities.

Big Challenges, Small States: Island Nations Come Together for Climate Action

Rachel Kyte's picture

New community buildings in Samoa

On Sunday in Apia, the capital of Samoa, I saw the results of the World Bank Group’s work with coastal communities that were devastated by the 2009 tsunami and by Cyclone Evan in 2012.  Working with the Samoan government and partners, we built coastal roads and a new system of access roads that leads into the hills away from the seashore. Many families rebuilt their homes in the hills, and the new road system helps bind those new households together as well as providing safe escape routes should a tsunami or major storm hit the coast again.
 
The hard infrastructure construction is interesting; the community conversations about next steps for protecting the coastlines are even more so. The government is launching a series of community consultations that will bring together village mayors, women leaders, government agencies, and NGOs to decide how best to climate-proof their coastlines. The communities are set to decide if sea walls or mangrove plantations will best protect their land and livelihood.  

I’m in Apia with a team from across the IFC and the World Bank to represent the World Bank Group at the 3rd UN Conference for Small Island Developing States and took the opportunity to learn more about climate and disaster risk management at the community level.
 
For island nations, the small size of their land and their economies comes with a set of unique vulnerabilities that makes climate change a major determinant of their ability to thrive and in some cases even survive.

Managing Risk for Development – Through a New World Bank MOOC

Sheila Jagannathan's picture

In the past two decades while the world has experienced global integration, technological innovation, and economic reforms, there has also been financial turbulence and continuing environmental damage. As the world changes, a host of opportunities are constantly arising, and with them, appear risks both new and familiar.  These risks range from the possibility of job loss and disease, to the potential for social unrest and natural disasters. This is the topic of a new World Bank Group MOOC illustrating how risk management can be used as a tool for development by helping to minimize crises but also unlocking important opportunities.

Addressing the Perfect Storm

Francis Ghesquiere's picture

A perfect storm of disaster risk is forming at the intersection of population growth, rapid urbanization, and climate change – one that is threatening to upend efforts towards achieving our development goals.
 
The number of natural disasters has nearly doubled in the last three decades, with the cost of these events increasing substantially– from around $50 billion annually in the 1980’s to just under $200 billion a year in the last decade, with extreme weather events responsible for nearly three-fourths of these losses.
 
One reason is population growth, 95 percent of which is happening and will continue to happen in developing countries. Another is rapidly expanding cities. Growing stress on infrastructure, utilities, and housing will only exacerbate risks and undo decades of achievements in development and increase the burden on humanitarian efforts.


Pages