As a large scale, highly technical and also innovative investment project, which extends over several decades, the multinational project is politically and socially sensitive. For a successful outcome, it will be necessary to manage the associated risks in a professional manner.
7.1. PRINCIPLES OF RISK MANAGEMENT
Risk management in the most commonly used approach is defined as “co-ordinated activities to direct and control an organization with regard to risk”, with risk itself being defined as “the effect of uncertainty on objectives” (ISO 31000 [27]). The risk management process is then characterized as a “systematic application of management policies, procedures and practices to the tasks of communication, consultation, establishing the context, identifying, analysing, evaluating, treating, monitoring and reviewing risk”.
The overall method used for risk analysis includes the following steps:
— Identify potential risks;
— Determine the risk (i.e. the expected likelihood and consequences of specific types of events);
— Define ways to reduce those risks;
— Prioritize risk reduction measures based on a strategy.
The above steps are usually preceded by the identification and characterization of the threats involved.
Risks relate to events that, when triggered, cause problems. Hence, risk identification can start with the source of problems, or with the problem itself. When either source or problem is known, the events that a source may trigger or the events that can lead to a problem can be investigated.
The strategies for managing the risks include:
— Avoidance (eliminate the risk by withdrawing from the undertaking);
— Reduction (optimize and mitigate);
— Sharing (transfer some risk to partners; outsource or insure);
— Retention (accept risk and allow for it in the budget).
The approach followed in this section is based on problem identification within a particular threat category.
This approach helps to organize the different problem or threat areas into more or less homogeneous category clusters for ease of analysis. Risks can come from many different threats, such as, financial markets, project failures, legal liabilities, regulatory delays, political upheavals, accidents, natural causes and disasters, or events with uncertain or unpredictable root causes.
7.2. RISKS IN A MULTINATIONAL PROJECT
In view of the complexity of a fully fledged multinational project, it is beyond the scope of the generic analysis in this publication to identify all of the potential risks involved, or to determine the specific risks relating to the project and to describe exact ways in which such risks can be effectively reduced. The same argument rules out the possibility of prioritization of the risks at the current stage. A risk management approach involving all the steps in this methodology is only possible once a detailed multinational project specification is available.
Risks to the multinational project are examined in terms of the following threat categories: technical, economic, institutional and sociopolitical (Fig. 1). Examples of possible disruptive events are highlighted in each of the categories, and the expected impact on project progress and partnership arrangements is briefly noted. This is followed by a summary of the applicable mitigating measures that can be applied. In practice, these risks may involve more than one problem/threat category, or combinations thereof, in which case, the risks are classified under the category that plays the most decisive role in the outcome. It is no surprise that the most obvious and most numerous risks are in the socioeconomic category. This directly reflects the challenges faced by national waste management programmes. The United States National Research Council came to the same conclusion, stating that for national disposal programmes, “Today the biggest challenges to waste disposition are societal” [28].
Technical
Financial
Institutional
Political
Project Stages Impact of Disruptive Events on
MN Project Success Problem / Threat
Categories
Phase 1:
Conceptual Phase 2:
Preparation Phase 3:
Planning Phase 4: Pre site
selection Phase 5: Post site
selection
Risk to MN Project Success
Disruptive Events Project Impact
Partnership Impact
Host
Country Partner
Countries 3rdParty Countries
RISK=[Likelihood of Event] x [Impact of Event]
MITIGATION= Reducing impact on Project & Partners
Multinational Linkages
FIG. 1. Impact of disruptive events on multinational project success.
In an actual multinational project, a fully fledged risk analysis would have to be carried out and the mitigating measures defined in detail to allow estimates of the risk reduction and the cost of this reduction. Caution has to be exercised to not overcompensate for potential risks. Overcompensation may take the form of excessive mitigating measures that tend to complicate project implementation and potentially add significantly to the overall project cost. Ideally, a balance should be struck between preventive (before the event) and corrective (after the event) mitigating measures in the execution of the project.
It is important to bear in mind that many of the risks identified for multinational projects and also many of the mitigating measures — are equally applicable to national waste management programmes.
7.3. TECHNICAL RISKS
A risk arising within the technical category may have a disruptive effect not only on project progress directly, but also on the partnership arrangement, which in turn may affect project progress.
Multinational projects are designed to evolve logically through the different project implementation phases.
During this implementation process, technical issues are systematically addressed and progressively resolved.
Hence, it is reasonable to assume that risks falling within the technical category are fairly well under control. But each multinational venture will have its own unique features that have to be analysed in detail. In this discussion, some relatively obvious threats and risks are briefly considered in order to illustrate the approach being followed.
In Table 2, a simple cause and effect relationship is established for each of the risks analysed. It starts with a particular event that gives rise to certain consequences for which mitigating measures are proposed. A mitigating measure can be implemented based on prior anticipation of the consequences, or implemented after the event has occurred in order to ameliorate the consequences.
TABLE 2. EXAMPLES OF TECHNICAL RISKS
Event Impact/Consequences Mitigation
Unexpected fluctuations in disposal requirements of participants
— Conflict with original contractual agreements entered into between partner countries
— Partner countries are unable to dispose of all their waste as originally planned (if inventories increase)
— Uneconomic operation (if inventories decrease)
— Build into the contracts specific prohibitions to unilateral reduction of repository disposal volumes
— Leave room for re-negotiation of contractual terms where possible
— Keep siting options open for as long as possible to accommodate future repository expansion programmes
— Provision of a flexible repository design to cope with possible future waste fluctuations Unexpected tightening of
waste acceptance criteria (WAC) imposed by host country
— Conflict with original contractual agreements entered into between partner countries regarding multinational WAC
— Tightening of WAC leads to cost increases for partner countries
— Build into the contracts specific prohibitions to unilateral WAC variations
— Allow room for future negotiations in the contractual agreements to incorporate reasonable requests for future WAC tightening
Operational accidents — Project stopped or delayed
— Loss of public trust — Maintain highest technical standards
— Strict oversight with involvement of regulators in partner countries
Malfunction of the completed
facility — Expensive remediation measures
— Loss of public trust — Highest technical standards and state of the art siting processes
— Strict oversight with involvement of regulators in partner countries
In a multinational repository project, as in other projects of this nature, it is customary to perform a hazard analysis (mostly for safety reasons) during the design phase of the project. The hazard analysis aims to put in place an effective mitigating strategy to address potential problems.
7.4. FINANCIAL RISKS
Financial (or economic) risks involve commercial and cost complications that may influence the viability of the multinational project. The likelihood of financial risks may be increased by the lengthy project implementation timeframes involved. The selected examples presented in Table 3 are potentially serious and require adequate provision in the contractual arrangements at the outset of the project. Not only may project delays be involved, but the partnership may also be detrimentally affected. There are many other events of this nature that need to be analysed at the project planning stage, depending on the needs and preferences of the partnership involved.
TABLE 3. EXAMPLES OF FINANCIAL RISKS
Events Impact/Consequences Mitigation
Participants postpone transfers to repository because waste is in national stores
— Revenue stream insufficient to cover
running costs — Provide cost incentives for timely transfers
— Penalize partners for non-use of allocated capacity in the repository
Unexpected disposal tariff increases imposed by host country
— Partner countries find tariff increases
unaffordable — Make provisions in contractual arrangements for excluding such increases unless negotiated and agreed
Unexpected financial difficulties experienced by partners to meet multinational commitments
— Partner countries wish to withdraw from multinational project
— Partners withdrawing from the project tends to reduce the benefits of economies of scale
— Contractual guarantees may encourage continued participation
— Provision for entrance fees/penalty clauses in contracts for withdrawal from the multinational undertaking
— Allowing extension of timeframes where expedient
— Entry conditions to require sound financial schemes to protect segregated funds set aside for specific multinational purposes
Escalation in implementation
costs — Funding allocated by participants is insufficient
— Contentious debates about responsibility for overruns
— Conservative cost estimates with realistic contingencies
— Point to responsibility of all participants to agree these estimates
— Tight monitoring and control of costs by multinational oversight committee
7.5. INSTITUTIONAL RISKS
Institutional risks can arise from difficulties in meeting legal and regulatory requirements within a partner country. These difficulties must be resolved in conjunction with the competent authorities responsible for the implementation of the national regulatory regime. In this regard, the multinational project will be dependent on the successful implementation of the regulatory systems in the individual partner countries, with the host country regulator naturally playing a decisive role.
The examples presented in Table 4 concerning regulatory non-compliance and the imposition of more stringent regulations reflect possible future events for the multinational project. The approach to resolving such risks should be well developed at the national level where the impact of regulatory difficulties will occur and where they have to be resolved. The multinational project is particularly vulnerable to serious regulatory problems arising in one or more of the partner countries. If such problems are not adequately resolved in a timely fashion, they may seriously affect the overall performance of the multinational project. This is especially true for the host country.
TABLE 4. EXAMPLES OF INSTITUTIONAL RISKS
Events Impact/Consequences Mitigation
Legal challenges to siting or
licensing in host country — Delays and cost overruns — Intensive scrutiny of all relevant legislation before choosing sites or submitting licence applications
— Transparent information policy that encourages early identification of potential contentious issues
Changes in laws of host country
after siting — Delays or abandonment of project — Ensure government level consent at outset and a full set of government to government bilateral agreements
Failure of multinational project to
meet overall safety requirements — Non-conformance with safety requirements resulting in withdrawal of licences
— Imposition of more stringent safety regulations and standards within the participating countries
— Ensure regulatory cooperation among the participating countries as a means of resolving future regulatory conflicts
— Strict adherence to safety requirements and commitment to a sound safety culture from operators
— Maintain transparency in public communication when reacting to media coverage of
non-compliance More stringent regulations
imposed by national regulators of participating countries
— Delays in transfer of waste packages and/or disposal implementation
— Increased costs due to more labour intensive practices related to new regulations
— Ensure that national regulators from partner countries become involved in the project from the beginning
— Require formal sign-off on applicable regulations by regulators in all participating countries
7.6. SOCIOPOLITICAL RISKS
Political risks are not only unpredictable, but are generally the least controllable. As a means of ensuring ongoing political and public support, a voluntary approach including a wide range of stakeholders in each participating country should be followed as far as possible. This may make it more feasible to accommodate swings in public opinion, which cannot be excluded, even after firm commitments to expedite the project have been made.
In this regard, it must be noted that public opinion will be influenced by political opinions, which to a large extent reflect public views, and that complex interactions can result. The media will also influence public perceptions of the multinational project. Experience in national waste disposal programmes has shown that political decisions can lead to the failure of even mature, established repository programmes, as was the case with the Yucca Mountain project in the USA. Experience has also shown that citizen protest can delay or stop projects that have political and legal consent, as has happened in France, Germany and Switzerland in the past. A complicating factor for multinational projects is that, in the political arena, debate on a multinational facility may well be mixed with many other issues affecting interactions among participating countries.
For the examples given in Table 5, there is a parallel between multinational projects and national programmes for countries where there are sub-national entities such as states, counties or cantons with a large degree of autonomy which must coordinate their activities to seek resolution of the waste disposal issue.
TABLE 5. EXAMPLES OF SOCIOPOLITICAL RISKS (cont.)
Events Impact/Consequences Mitigation
No volunteer countries offer to
host repository — Multinational project cannot go ahead
— This difficulty would typically arise at the end of Phase IV of the project, i.e. after completion of site characterization work and before the selection process begins
— Re-examine the outcome of the siting studies and resolve any possible misunderstandings
— Make the incentives for hosting very clear and allow the host to negotiate these
— Invite more than one volunteer as a means of taking the focus off a single volunteer One or more participating
countries withdraw from multinational venture
— Project’s economic viability compromised by withdrawals
— Durability of long term multinational cooperation compromised
— Emphasize benefits of multinational cooperation for partner countries regarding incentives of cost sharing and economies of scale
— Emphasize examples of successful multinational cooperation
— Defer decision on host country selection until problematic issues have been resolved
— Specify at the outset the point up to which withdrawal with no repercussions is allowed, after this, there could be financial penalties National elections in which
multinational project is an issue (host and partner countries)
— The multinational project becomes an election issue with politicians perceiving that support can be won by opposing the multinational project
— Ensure cross-party support in participating countries
— Early, sustained and prominent information on the benefits of participating in the multinational project and, in particular, of acting as host
— Agree long term binding contracts, penalty clauses etc. aimed at discouraging policy changes that may jeopardize the future viability of the project
Societal opposition
(public acceptance, litigation) — Delays and cost overruns in the project
— Loss of political support
— Negative public image for the project
— Ensure that the public participation programme is well designed and executed
— It is especially important that the multinational programme be properly launched
— Maintain close collaboration with the volunteer host community that will lose out if the project fails
— Societal acceptance may also be enhanced by pointing out that the alternatives to a multinational project are going it alone (which is expensive) or having no solution (which is irresponsible)
National disposal programmes slowed or stopped because of changing priorities
— Cheaper short term alternatives such as extended storage are favoured
— Pressure from national waste management bodies to cut any multinational projects before national projects are cut
— International organizations continue to stress requirements on States to provide a disposal solution
— International organizations continue to stress that the solution can be a multinational approach
Neighbouring country does not allow transports through territory, either for legal reasons
(ban on transport) or to avoid social disruption
— Delays
— Negative image for project — Emphasize international agreements on freedom of transit for goods
— Early integration of neighbours into multinational project discussions
TABLE 5. EXAMPLES OF SOCIOPOLITICAL RISKS (cont.)
Events Impact/Consequences Mitigation
Reduced consensus of desirability of disposal solution (new technology, changing in ethical approach)
— Push for extended storage — Public information on scientific consensus on the safety of geological disposal
— Public information on scientific consensus on the need for geological disposal in any future nuclear scenario