Depending on the size and type of project, the development phase will require considerable planning and may include both a pre-feasibility study and a feasibility study as well as an environmental assessment. All risks associated with the project construction and operation need to be identified and addressed as far as possible. These questions can help identify risks that are specific to this phase:
1. Do regulations exist that enable the project to proceed? Regulations may be the sole responsibility of the local government but some projects will require the approval of provincial or national planning authorities.
2. What is the project developer’s credit rating? Private sector lenders, development agencies and national government departments may all be influenced by the credit rating when deciding whether to offer loans, grants or other financial support.
3. What technology is proposed to be used, if any? A project developer may want to implement an innovative project but there is a risk that the innovative technology may not be as reliable as a less innovative alternative. A potential funder will be more likely to provide a loan or grant if it understands the project and is familiar with the technology to be used.
4. Where is the funding being sourced from? Foreign funders will face the risk that exchange rates will change during the project development phase. Budgets developed during project planning can change significantly when converted to foreign currency.
5. How many companies are likely to bid for the project? There may be very few if the project requires specific expertise or technology that is not widely available. Few bids for a project can result in costs that are higher than expected and may make the project less viable or even stop it proceeding.