Risk management can save large projects $5 trillion

Governments and businesses can reduce the cost of their infrastructure investments by more than $5 trillion by 2030 if they improve how they manage the risks inherent in large projects, according to a new report by global management consultancy Oliver Wyman.

An OECD study sponsored by the firm, Maximizing Returns on Large Investment Projects, estimates that 200 public and private capital investment projects each worth at least $500 million are under way globally. Many suffer from cost overruns and delays. In total, $53 trillion needs to be invested in public infrastructure by 2030 to keep the global economy on a firm path to recovery.

The financials of these large infrastructure projects can be improved significantly by developing greater transparency around the risks involved in them and then tracking mitigation efforts closely. Largescale infrastructure projects come with largescale delays carrying largescale costs if they are not correctly managed.

The report recommends a new framework for managing the risks involved. The framework provides critical guidance at three key points of a project’s lifecycle: the initial assessment of the investment, the design of the plan for building it, and the project’s execution.

“Identifying and mitigating risks enable governments and companies to reduce cost overruns and delays by 20%, and sometimes much more,” says Kristina Gerteiser, an associate partner in Oliver Wyman’s Corporate Finance & Restructuring practice.

For further details on the framework see Oliver Wyman > Maximizing Returns on Large Investment Projects