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Infrastructure sector risk being evaluated in major global study

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Organisations operating in the infrastructure sector are being encouraged to share their experience of managing risk and the way it is allocated in their contracts – as well as their views on what risks they expect to be prevalent over the next decade – in a major new global survey.

Pinsent Masons’ 2024 global infrastructure survey is open to global contractors, building materials and equipment suppliers, public and private sector infrastructure owners and operators, governments, financiers and investors, and technology providers, and other stakeholders. A representation of views globally is sought, as well as those from organisations active in different infrastructure markets – from airports, buildings, and energy, to rail, roads, mining, ports, tunnels, water, and data centres.

Infrastructure law expert Rob Morson of Pinsent Masons said: “The optimal allocation of risk, though fundamental to project outcomes, is not sufficiently considered and often boiler plated at project inception, with scant regard for changing risk appetite and market conditions. This year’s global infrastructure survey therefore looks at how risk allocation has shifted and what the market views are regarding the appropriateness of current risk allocation approaches. Its aim is to assess trends across markets and project types.”

There are a variety of risks that organisations active in the infrastructure sector may encounter.

Within projects, organisations will often have to grapple with consents and approvals, design liability, delay, health and safety, and the interface between multiple contractors or suppliers, while further risks can arise from a lack of availability of goods, materials, and personnel, geological conditions, or in respect of timely payment. Strike action, riots, theft and vandalism, can also pose a risk to projects. In certain jurisdictions, there can be a heightened risk of fraud, bribery, and corruption too.

There are also many risks facing organisations in the infrastructure sector that they have little or no control over, like natural disasters, pandemics, and inflation and currency volatility, while geopolitical issues can spur war and/or the imposition of financial or trade sanctions. Changes in law can also present a risk, while businesses across sectors have been responding to the increasing climate and sustainability agenda – and to growing cyber risk – in recent years.

Participants in Pinsent Masons’ survey are invited to select the risks they view as priority risks and in which infrastructure markets the risks are materialising. They are also invited to share their experience of how such risks have been allocated within their contracts in recent times – and whether there are any risks they feel are being misallocated. Other questions posed seek to understand the difficulties organisations have experienced in allocating risks – and the underlying reasons for those – and obtain an insight into how they view insurers’ response to the evolving risk environment.

The final questions in the survey focus on what main risks organisations in the infrastructure sector see emerging over the next two and 10 years.

Morson said: “The survey results will enable us to assess shifts in risk allocation. Overlayed with our in-depth knowledge of these sectors and markets, we will extract observations and discussion points in a way that is relevant to our clients; speaking directly to what is top of mind for our clients and the market.”

The survey will be supplemented with individual interviews with a selection of participants and the preliminary results of the survey will be presented at Pinsent Masons’ law review of construction in February 2024. Pinsent Masons has pledged to make a $5 donation to the SOS Children’s Villages charity per response for the first 400 responses to the survey it receives, to support the development of vital infrastructure for vulnerable children around the world.

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