Risk Management in Large Physical Infrastructure Investments: The Context of Seaport Infrastructure Development and Investment

Mun Wai Ho () and Kim Hin Ho
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Mun Wai Ho: Planning and Portfolio Management, Singapore Sports Council, National University of Singapore, 4 Architecture Drive, Singapore 117566.

Maritime Economics & Logistics, 2006, vol. 8, issue 2, 140-168

Abstract: The growth of developing countries depends very much on having adequate physical infrastructure to support economic development. As a strategic response, many physical infrastructure investments like seaports are being privatised and highly purpose built. This paper investigates the merits of viable seaport infrastructure investment, typically ‘lumpy’ and requiring large capital expenditure and long payback period. A key feature of such an infrastructure investment is to structure a defensible risk management strategy to deal with uncertainties. This risk management strategy can provide responsive alternatives to new opportunities. Singapore's Jurong Port is the case study. The original risk management strategy is analysed in 1996, and deploys risk simulation for scenario planning in conjunction with constraint optimisation. This original risk management strategy finds that it is more defensible to configure Jurong Port, and a seaport in general, into the maritime industrial and logistics park (MILP) instead of the higher-margin and purpose-built container terminal strategy, which is inherently volatile (ie uncertain or risky). The planned scenarios and their projections, under the original risk management strategy are then compared with the consequential developments in reality. The results highlight that the sustained viability of Jurong Port in 2004 is attributed to that risk management strategy, originally developed in 1996. Maritime Economics & Logistics (2006) 8, 140–168. doi:10.1057/palgrave.mel.9100153

Date: 2006
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