Arani Town - Municipal

Chapter - 11 Final Report: Arani Municipality
Category Mitigate measures
Ensuring service delivery
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Independent commissioning tester to ensure
delivery of the required performance.
O&M risk
Increase in predicted operating costs Address future service delivery demands also
Impact of design flaws & defective
construction, deterioration of
performance standards
Technologically outmoded practices
Inherent defects of the system
Defaults from designer, builder and
operators
Funding uncertainties
Cost escalation
Delays in financial closure of the
project
General economic down turn
Changes in Government policies,
Shift in industry focus
Operating guarantees/performance bonds to
ensure service continuity and compensation for
default
Inbuilt options for upgrading technology as the
contract term proceeds
Escrow mechanisms to ensure protected cash flows
and enforce during service/operational default
Financial risks
Termination rights in case of insufficient
delivery/break down in service provision
Ensuring project structure, in-built contractual
provisions and foreseeing risks make the project
bankable, addressing lender related issues.
Mitigate risks arising from inflation, interest rates,
foreign exchange rates etc.
Avoid looking for the lowest cost bid- base
selection upon financially sound structure and
business plan
Market risks
Quantify demand, providing demand related
information at the bid stage
Initiate feasibility studies, demand forecasting,
sensitivity analysis.
Change in target-market competition Incentives to stimulate end-users
Floods, Cyclones, Earth quakes,
Tsunami
Insurance coverage
Interruption in Service delivery
Project initiation
Private operator
Risks from Natural disasters
Minimize impacts through appropriate insurances
to transfer risk to insurer
Regularly review insurance policies to ensure
effective and adequate coverage
Appropriate action plans for temporary service
arrangements
Risks in Private sector participation
Specify desired project outcomes, taking into
account Govt. policies
Ensure sound financing pattern or the model on
which the private sector has based its participation
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