Infrastructure development is a powerful force in today’s global economy. Hundreds of billions of dollars are being spent every year improving transportation, power, ports and terminals, and energy capabilities. As countries seek to repair, replace, or build new infrastructure, they increasingly are looking to the private sector to help finance the huge required investment.
Infrastructure funds, developers, contractors, banks, accounting firms, law firms, consultants and more are positioning themselves to participate in what is generally perceived as the greatest growth opportunity in the world.
Touching on politics, public policy, law and regulations, finance, engineering, construction and operations the global infrastructure sector is time, labour, and capital intensive. And it involves a significant amount of risk. Appropriate risk allocation and risk sharing are critical factors to the success of any infrastructure project, which typically involve long-term contracts that make it difficult to plan for every contingency. Risk, however, is a natural corollary to a return on investment, or to the intended public benefit.
Effective risk management generated by thorough assessment, mitigation and transfer, will have a positive effect on a project’s development and ultimate operational efficiency. Well managed and optimised risk goes hand in glove with opportunity. At both the project and participant levels, risks are critical, complex issues and have the potential to adversely impact specific assets, valuations, capital structure and volatility of cash flows needed to service fixed obligations and underpin yield over the period of an investment.
As the only insurance broker and risk adviser that is part of the global infrastructure value proposition, Marsh understands the nuances of risk as they relate to infrastructure project finance. Our team is uniquely positioned to discuss strategies aimed at reducing the volatility inherent in large infrastructure projects.