The UK Financial Sector and Risk Management in PFI Projects: A Survey

In PFI transactions the private companies which take on the obligation to build and manage a facility usually provide only a small fraction of the project's capital requirements. Most of the capital is borrowed from banks and other financial institutions. This poses challenges to financial services providers which often have to retain untypical residual project risks. This article describes the types of risks faced by financial services providers and the strategies they use to cope with these risks. Given the often politically-sensitive nature of PFI projects, the authors suggest that financial institutions should investigate a broader set of parameters than they do at present, which relate directly to the political economy of PFI projects.