Managing risk more effectively in social infrastructure

Delivering it in a timely, efficient and cost effective way is rarely a simple matter for governments and local authorities. Development priorities often vary while funds are, by nature, finite.

Achieving value for the taxpayer money allocated to social infrastructure should be the overriding imperative for procurement and project teams and the metric by which success is gauged.

Almost two thirds of survey respondents believe comprehensive risk allocation and management is the most important factor contributing to the success of a procurement process. Comprehensive project management and ongoing monitoring and reporting were also cited as key contributors at 53% and 37% respectively.

These findings are drawn from Ansarada Procure’s 2025 Social Infrastructure Outlook Report, developed in partnership with Infralogic, which incorporates survey responses and insights from 150 infrastructure leaders from around the globe.

The perils of poorly managed risk

That procurement teams have become hyper focused on risk is hardly surprising, given distributing it poorly can have far reaching and highly negative consequences.

Shifting liabilities unfairly to contractors can lead to bidders inflating their prices or opting out of tenders altogether. The subsequent reduction in competition generally results in higher costs.

Conversely, if governments or local authorities absorb too much of the risk themselves, budget over-runs and failed projects can put unacceptable strain on the public purse and necessitate cuts to investment and services, to make up the shortfall.

The onus is on procurement leaders to square this circle by taking a dynamic approach to risk allocation – assessing it, reassigning it and mitigating it in response to evolving economic, environmental and policy settings – rather than the rigid, one-size-fits-all methodology historically employed by many public sector entities.

“Effective risk allocation means placing risks with the party best equipped to manage them,” Infrastructure NSW’s Associate Director, David Hurrell notes.

In the absence of a transparent, balanced approach to risk, conflict is almost assured. Disputes and contract renegotiations can be time consuming and acrimonious, particularly if the sums at stake are significant, and delayed completion is very often the result.

De-risking the project management process

If efficient, equitable procurement is one half of the secret to successful risk mitigation in the social infrastructure sphere, competent, rigorous project management is the other half.

In its absence, project outcomes can all too easily be undermined by mission creep, misaligned stakeholder expectations and procurement inefficiencies. Approval delays, supply chain disruption and poor risk distribution are a recipe for escalating costs and diminishing investor and community confidence.

Identifying clear, objective project milestones, tracking risk and maintaining visibility is particularly vital for projects that are high value and long term in nature. When the stakes are high, delays or missteps in project management can have cascading effects that impact communities’ access to essential services, such as healthcare, housing and education.

Best practice calls for a structured, transparent approach, one which mandates accountability and efficiency at every stage of the project lifecycle, from preliminary planning through to long term asset management.

It also demands stringent documentation. Without clear, complete records spanning every aspect of a project’s progress, from planning through to maintenance, the risks of misinterpretation, disputes and legal challenges are ever-present.

Conversely, when rigorous documentation protocols become standard project management practice, approvals can be streamlined and decision making derisked.

Accounting for ESG related risk

And then there are ESG imperatives. For 61% of survey respondents, ESG integration has become the most critical factor for risk allocation.

In many jurisdictions, this development comes courtesy of governments and public authorities. In Australia, for example, the Social Housing Accelerator program has codified ESG considerations into its policy framework by mandating energy efficiency measures be incorporated into all new dwellings.

For suppliers, there are clear commercial incentives to prioritize sustainability. ESG-aligned projects typically enjoy greater access to finance on favorable terms and have reduced exposure to penalties, litigation and reputational damage.

But while prevention is always better than cure, a significant proportion of suppliers continue to view insurance as their primary risk management measure. Almost two thirds of privately owned developers cited comprehensive cover, in the form of contractor liability insurance and builder’s risk insurance, as their chief protection against construction delays, cost overruns, third party disputes and other volatile risks.

Turning to technology

Digital technology has a vital role to play in the successful carriage of future social infrastructure projects. The judicious adoption of procurement and project management solutions can have a transformative effect, enabling public authorities and their procurement teams to manage and monitor risk and reward effectively at every stage of the development process.

“Historically, the market has been very traditional in how it builds and prices future risks, but I have to believe that the tools we have available to us now should begin to give infrastructure developers and operators a better line of sight to future obligations and liabilities and allow those risks to be managed more effectively,” KPMG US’ Managing Director, Iain Tester says.

Using advanced risk analysis tools to conduct scenario modelling, for example, can enable procurement teams to identify and pre-empt risks before they arise or escalate. AI-driven risk assessments can provide granular insights into potential pitfalls, from supply chain disruptions to changing regulations, while machine learning algorithms can forecast permitting problems that may impact on project timelines.

Swapping laborious manual methodologies for automated, digital alternatives makes it easier to embed resilience and responsibility into social infrastructure projects and ensure they’re delivered on time, on budget and to a high standard.

It’s a switch that’s gaining increasing support at the decision maker level.