Risk Assessment of Results-Based Funding Mechanisms for Infrastructure Programs

Recently international lending institutions are investigating financing solutions that enhance the effectiveness of their funds. Results based funding mechanisms consider this objective through diverting the lending cycle, where lenders pay agreed amounts following the achievement of results. This introduces the need for a proper assessment of risks, when considering such mechanism in financing infrastructure programs. This paper provides a risk assessment framework for supporting governments throughout the risk assessment process for programs financed through results-based funding mechanisms. It considers the program-for-results mechanism as one of the results-based funding mechanisms offered by international financial institutions. The introduced methodology includes four main steps: (1) risk identification based on most common risks from previous operations, (2) risk assessment based on risk surveys distributed for each specific program, (3) risk response based on a preset list of relevant risk mitigation measures for each risk, and (4) risk monitoring through the follow-up of risks occurring throughout the implementation process.