INTRODUCTION

Risk is the chance that an event would occur which will lead to change in the project circumstances that were assumed while forecasting the project costs and benefits and will have an impact on project objectives. To ensure that these events do not lead to failure of the projects, there is a need to manage the risks associated with the projects through adoption of appropriate risk management framework. In order to successfully manage the risk, it is necessary to know: what event will trigger the risk, the probability (or likelihood) of occurrence of the risk event, and the consequences of the risk event if it occurs. The concept of risk management, therefore, deals with identifying the risks associated with the project, assessing their probability of occurrence and their potential impact on critical project performance measures, and employing direct and indirect means for either reducing the exposure of the underlying project activities to these risks or shifting some of the exposure to other.

The following sections focus on the concept of risk management process and the benefits of risk management.

RISK MANAGEMENT PROCESS

Risk management is an ongoing process which continues through the lifecycle of a PPP project. The risk management process takes place in the following stages:

• Risk identification: The process of identifying all the risks associated with the project, whether during its development phase, or its construction or operational phase.
  
• Risk assessment: The process of determining the likelihood of the identified risks materialising and the magnitude of their consequences if they do materialise.
  
• Risk allocation: The process of allocating responsibility for dealing with the consequences of each risk to one of the project stakeholders, or agreeing to share the risks.
  
• Risk mitigation: The process of attempting to reduce the likelihood of the risk occurring and the degree to its consequences for the risk-taker

The successful implementation of the various stages of the risk management process requires putting in place an effective plan for communication and consultation with both the project's external and internal stakeholders in order to ensure that those responsible for implementing risk management and those with vested interest understand on what basis decisions are made and why particular actions are required. This consultative approach help to define the context appropriately, to help ensure risks are identified effectively, bringing different areas of expertise together in analysing risks, ensuring different views are appropriately considered in evaluating risks. This approach also instils a sense of ownership of risk to the managers and the stakeholders.