Project Finance and Preliminary Risk Assessment

Abstract

The study examines the essence of preliminary risk assessment in project finance; identifies the typical project risk at start-up and its mitigation; analyzes financial and political risks surrounding a project and the determines a lenders position in the midst of risk. The main purpose of conducting a preliminary risk assessment as part of the project finance assessment is to identify and quantify the main risks associated with the project, and to determine the optimum allocation of risk between the public and private sectors. The study revealed that the assessment of risk in the life-cycle of a project is imperative to the survival of such projects. A good assessment provides a favorable ground for identifying and mitigating project risk.

Keywords: Risk, Life-cycle, Political Risk, Start-up Risk, Financial Risk, Project Finance

JEL Classification: N2