Catastrophic risk analysis and management for Public-Private Partnership (PPP) infrastructure systems

• Main Author: Qian, Qiyu
• Other Authors: Tiong Lee Kong, Robert
• Format: Theses and Dissertations
• Language: English
• Published: 2012
• Subjects: DRNTU::Engineering::Civil engineering::Construction management
• Online Access: https://hdl.handle.net/10356/50946
• Institution: Nanyang Technological University

Globally, there is an increasing trend in adopting a Public-private partnership (PPP) scheme to develop large-scale infrastructure. However, little efforts are made to assess the impact of catastrophic risk on the economics (i.e. cash flows) of PPP infrastructure projects. Therefore, this study on catastrophe model for PPP infrastructure projects was undertaken with the aim to bridge the gap, what’s more important, catastrophic risk management strategy is developed for concessionaire and government respectively based on the results from catastrophe model. Based on hazard module, vulnerability module and loss module, a pro forma cash flow model would form a useful basis for quantifying seismic risks and measuring the dynamic financial demand of the project. As a pilot study in this area, this research developed its model based on assumptions because of limited engineering data available. Monte Carlo simulation through MATLAB programming was carried out to incorporate the uncertainty of seismic risk in frequency and severity. The estimated loss derived from the model may have less importance because it is largely depended on the quality of the input data. However, the changing trend of the results derived from sensitivity analysis which indicates the relationship between impact factors and catastrophic losses will guide development of risk management strategy. The model is developed to assess the financial losses due to earthquake for highway projects. It can also be applied to other types of PPP infrastructure projects depended on the similarity of cash flow generation. Respective revisions may be made to the MATLAB program if the model is applicable to other types of PPP infrastructure projects and catastrophes as well. A scenario case study based on several given scenarios simplifies the impact of temporal uncertainty of occurrence. It is carried out to find the optimal mitigation strategy for concessionaire. Most concessionaires (run for efficiency maximization) will select mitigation in the beginning as the optimal strategy given no financial constraint. The results from the model also indicate the merits and different incentive of dynamic risk management with varying impact factors. The focus of this research aims to structure catastrophic risk management strategies for government and concessionaire respectively. Such strategy is developed based on an in-depth understanding of the project’s risk exposure derived from catastrophe model, layered risk financing portfolio setup decided by concession agreement, cost and benefit analysis between different risk financing instruments and mitigation efforts, and last but not least, a good understanding of dynamic financial demand.