Case study 3

Giving an objective overview of risk and reward

A successful engineering and construction company exploring expansion opportunities overseas was attracted by a major infrastructure joint venture. But it was in an unfamiliar industry and a country where the client had little experience. Nigel Pantling was asked to help assess the risks and how to manage them.

He identified five risks areas:

  • the country's difficult political and business environment
  • contract structure
  • default by joint venture partners
  • fund raising failure
  • rejection by shareholders

He then:

  • Reviewed the proposal with the project team
  • Discussed market expectations with the client’s merchant bank and brokers
  • Consulted experts on the country and industry
  • Approached 12 banks likely to lead fundraising, establishing its feasibility
  • Classified principal risks according to gravity and probability, identifying how to mitigate the most urgent

Nigel concluded that returns could be high but the project only justified substantial investment if risks were reduced. He proposed a phased approach, focussing on risk limitation, and devised an action plan.