RIYADH — Building modern, complex giga-infrastructure projects will play an important role in the country’s success and will be used as a catalyst for economic growth in the future, an industry expert says.

At the recently held annual Infrastructure Risk Management Forum in Riyadh, the CEO of Marsh Saudi Arabia Bassam Albader, said in an interview that “the ultimate success of a project will depend on their ability to mitigate the risks involved – and not taking these carefully into consideration could have severe reputational and financial implications for all parties involved.”

Drawing from his report titled “The rise of the Giga-project: Risk Considerations for Middle Eastern Infrastructure Developments”, he said as the region, and in particular Saudi Arabia, looks to grow their economies and global stature through modern, complex infrastructure projects that could dwarf what has been seen previously, the eyes of investors and principal project initiators will be on the unique risks that come with these massive projects.

He further said the company played host to the annual forum this year as “we believe part of our role is to stimulate debate on a wide range of risk-related subjects that affect the investment, development and subsequent operation of upcoming infrastructure projects within the Kingdom. Awareness is the first step to finding solutions.”

He noted that Saudi Arabia is embarking on an exciting transformational journey, as it seeks to modernize and diversify its economy.” With a healthy pipeline of infrastructure projects and activity, hosting our annual Infrastructure Risk Management Forum in Riyadh made sense, particularly as Marsh deals with risk (not just insurance),” he added.

Excerpts from the interview follow:

• What makes this such an exciting time for infrastructure investment in the Kingdom?

The Kingdom is embracing its future and the development of key infrastructure is and will play an important role in the country’s success and will be used as a catalyst for economic growth in the future. The development of major infrastructure projects from world-class smart cities to nation-wide transportation infrastructure expansion programs will create jobs and make the country a more vibrant place for its citizens to live.

As the Kingdom navigates the risks and rewards associated with major infrastructure development, getting the balance right will be the key to attracting private investment. The pace and scale of change in the Kingdom makes it one of the most exciting infrastructure destinations in the world, and this is the case because the resources that need to be deployed to translate vision into reality are huge, and all of this requires extraordinary firms to make the extraordinary happen.

• What can you tell us about infrastructure risk in the region? Talk us through the different types of risk involved.

Because of their complexity and size, infrastructure investment projects – particularly those of the size and scale of the work taking place in the Kingdom – present significant risk exposures. Broadly, this is divided into one of three different types of risk:

1) Gaps in investment and public private partnerships, with Oliver Wyman recently highlighting an annual global investment gap of approximately $1 trillion - creating barriers for these projects going forward and highlighting the need for these projects to continue to attract capital from private investors. As such, many, the Kingdom included, are looking at the PPP model where a consortium of private companies build, finance and operate the asset.

2) Reputational and investment risks – a failed project can cause not only financial risk, but also deter investments from private parties into future projects.

3) Delays and cost overruns, which can impact cost, quality and delivery.

• What questions do you believe organizations or governments must consider during the early stages of these projects?

We believe there are three key questions both governments and private organizations need to ask themselves before the onset of any project: Which party takes ownership of which project risks? How viable are the project plans and financial rewards? How secure is the legal and financial framework and the dispute resolution mechanism? And if delays occur, are we in a position to pull back to the original schedule, or will such a turnaround prove unsurmountable? Clarifying the answers to these questions beforehand will be critical to managing risk effectively throughout the project’s life cycle. — SG