Risk Management and Governance for PFI Project ... - Title Page - MIT

Classification Examples
Risk
classification by
stage
Risk
classification by
business
Risk
classification by
cause
Risk Treatment
Table 7: Risk Classification and Examples
1. Commercialization planning stage
2. Facility design and construction stage
3. Operation and maintenance stage
4. Completion stage
1. Completion risk Construction cost/period and quality, etc.
2. Production risk Operation, maintenance, etc.
3. Market risk Demand forecast, actual support, etc.
(External risk)
1. Economic cause Prices, interest rates, exchange rate, etc.
2. Political cause Regime change, tax, law, regulations, etc.
3. Cause by natural phenomena Geology, meteorology, disasters, etc.
(Internal risk)
4. Social cause Labor issues, environmental issues, etc.
5. Technical cause Safety, reliability rate, innovation, etc.
6. Cause by partner Management foundation, reliability, etc.
7. Cause by team/human Consultant, leader
Source: Nagoya Urban Institute. (2008). Research on PFI.
After analyzing and assessing the risks, the way to respond to these risks should be considered.
The potential risk treatments include the following four measures: (1) avoidance, (2) reduction,
(3) retention, and (4) transfer. Table 8 shows a concrete example and summary of how to
respond to these risks. These measures are not uniform, but it is customary to address the risk
by combining multiple measures.
As stated above, this section describes an overview of the general process of risk management
from risk perception to risk treatment. In Japan, risk management is implemented in
accordance with the principles of these procedures; however, there remain various challenges
for risk allocation, contract expertise, risk workshops, and monitoring of financial institutions.
In the following section, risk management-related issues will be analyzed in more detail from
these four viewpoints by exploring the individual risks in real cases, which were discussed in
Chapter 3.
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