Risks Management in Implementing Mega Infrastructure Projects in

Developing Countries
There are certain high impact risks which are generally known to the project developers but usually
not addressed in the beginning. If addressed upfront with right vigour can mean a successful project.
Dealing with them later, as and when they occur, can impact the project adversely in terms of cost
and time.

1. External Stakeholders: This is the most influential class of stakeholders who wield influence
over the project over its entire lifetime. They can be higher echelon politicians and
government bureaucrats, local level politicians and bureaucrats, the press, political activists
in the garb of NGOs, local populace and last but not the least the local criminal elements.
Usually, enough research is not done in identifying them let alone deliberations and planning
for engaging them from the very outset. This should be done as part of high level risk
assessment when the project planning team is drooling over the rosy financials of the
project. This is the toughest group of stakeholders who are ever ready to extract their price.
If they are not managed well the project cannot be finished at all or can be finished only at
an exorbitant cost. Further, in case of infrastructure projects revenue streams are more or
less fixed and not amenable to increase owing capping on tariffs. Therefore higher cost of
implementing the project means lower than planned ROI, IRR/ NPV, inability to service debt,
in short, a sick business venture on hand, right at the commissioning.
2. Wrong selection of Risk Managers for managing external stakeholders: Most of the time
the job of managing the external stakeholders is entrusted to professional managers, who
are mostly from technical or finance background. By their training and background they at a
disadvantaged position in dealing with these stakeholders. They find themselves helpless
position when facing a nasty situation on ground (eg. agitations against the project,
extortion, harassment by government administrative machinery, motivated and bad
publicity by press, etc.). These stakeholders are bound by no rules, regulations, morality or
ethics. To better manage them a project needs a person/s who has considerable political
clout. This is an out of the box risk management strategy and many infrastructure
development firms would not be comfortable with the idea of engaging a person with
political background to manage the external stakeholders. However, this is an effective way
of managing these stakeholders. Although this gives rise to a secondary risk of managing this
person but the secondary risk can be mitigated if this person is selected after running a
thorough check on him. This strategy was used successfully by a project in the Central India.
A mega power project was being implemented and the project faced insurmountable
opposition from the PAPs (project affected people) who were represented and led by an
NGO. The company management engaged a professional politician from the then ruling
party. He was appointed as a Director in the company. His only job was to contain the
agitation and influence the government machinery to effectively implement the
rehabilitation and resettlement programme. The strategy worked out well and today the
power plant is pumping millions of electrical energy units into the national grid, year after
year.
3. Inadequate field investigations: Not investing enough time and money in gathering ground
level information on logistics; approach roads, availability of construction materials,
 availability of general purpose equipment on hire in the nearby vicinity, communications,
climate, availability of labour of the required skills close by, land availability for
accommodation and stores, medical facilities, evacuation facilities, etc. Information should
also be collected on the applicable local and national laws, taxes and duties, customs
procedures, etc. Also disposition of the local population to the project should also be taken
into account. Cost and time should be re-estimated based on the information gathered. If
adequate information is not collected and a lot is left to assumptions, realistic time and cost
estimates cannot be prepared. As a result there would be many upward schedule and cost
revisions during the life of the project. Schedules and costs tend to increase anywhere from
25% to 100%. Much more time and money is lost than saved by not conducting adequate
field investigations.

Further, project developers tend to transfer this risk to contractors. There is nothing
inherently wrong in this risk management strategy. Then the onus is on contractors to
mitigate the risks. They are still less likely to conduct prior investigations due to cost
concerns. In the process these risks remain hidden to be discovered later. This does not
augur well for the project. A developer can mitigate this risk to some extent by prior field
investigations and sharing quality information with the prospective contractors openly in an
environment of trust rather than suppressing unfavourable information. Then during
execution of the project the developer should use his clout and extend protective umbrella
to his contractors so that they can focus only on producing the deliverables of the project
and not fritter away their energies on unproductive work.

In addition to the above there are many more risks which need to be identified and managed
continually during the life of a project. These other risks can be managed at the level of a project
manager. However the risks described above are high impact risks and need involvement of the
highest level of management for delivering a successful MEGA INFRASTRUCTURE project in a
developing country.