The significance of financial risks in BOT procurement

This paper explores the significance of the financial risk characteristics of Build-Operate-Transfer (BOT) projects. The objective was to identify and discuss the significance of the types of financial risk variables in conjunction with the different phases of procurement. A survey was therefore conducted to investigate the nature of the relationships between the financial risk variables and the different phases of BOT projects. 'Interest rate fluctuation' was the most significant financial risk variable in the pre-investment phase. For the implementation phase, both the variables 'design deficiency' and 'time overrun' were found to be highly statistically significant. The variable 'time overrun' was found to be the most statistically significant in the construction phase. The majority of the risk variables were considered to be moderately significant in the operations phase; these included 'competition', 'currency exchange restrictions' and 'defective products or facilities'. A mathematical model employing discriminant analysis was established to demonstrate the classification of financial risk variables in relation to the five BOT project phases.