Overcoming sustainability issues through financial risk management in private finance initiative projects

Abstract

The sustainable procurement is the process in which the sustainable needs are achieved by balancing against the business needs while considering enhancing the values through entire lifecycle of the product, waste reduction and recycling. Among the sustainable procurement approaches, Private Finance Initiative (PFI) is one of them, which is bringing together the public and private sectors to work together in partnerships to best utilize the assets and skills of both sectors with the aim of creating better value for money for taxpayers while initiating the projects with funds of private sector. However, the risk which is in adverse and uncertain by nature leads to sustainability issues in PFI procurement. Project finance (PF) refers to situations where the loan for the project is repaid from the future cash flows of the project. Project finance has been used wide for financing infrastructure and public sector facilities like hospitals, power stations, prisons, etc. Financial risk as the impact on the financial performance of any entity exposed to risk. Therefore, there is a need to minimize the financial risk in PFI projects. Accordingly, the aim of the study was to emphasis on overcoming sustainability issues on project financing through better financial risk management for PFI projects in construction sector. Comprehensive literature review was conducted to identify the tools and techniques. The study was developed to provide step by step details in identifying and analyzing the key risks and mitigation procedures in sustainable way at particular project phase. Then the gaps were identified and the opinions to improve the sustainability were identified.