Developing a holistic financial risk management framework to optimize financial performance of public-private partnership projects in Ghana

Abstract

Over the past few decades, execution of public infrastructural projects has seen a dramatic involvement of the private sector resulting in a model termed as Public-Private Partnerships (PPPs). Financial risks of PPP projects are more prevalent in developing countries like Ghana. This study aimed at developing a holistic financial risk management framework to improve the financial performance of PPP projects in Ghana. Specifically, this study’s objectives include the following 1) to identify the critical financial risk of PPP projects, 2) to establish the critical financial controls of PPP projects, 3) to determine the financial risk management processes on PPP projects in Ghana 4) to ascertain the financial performance criteria of PPP projects, 5) to examine the interactive relationship between financial risk management, the financial controls and financial performance of PPP projects, and 6) to consolidate and design a financial risk management framework on PPP projects in the country. This study uses a mixed research method that began with literature review of relevant published studies. Afterwards, a theoretical foundation of the study is built with main and sub-hypotheses. The findings reveal that the building sector of PPPs in the country experience more financial risks in Ghana followed by road projects. The results also demonstrated that PPP projects constructed in the health sector has better financial risk management processes compared to other PPP sectors. PPP projects executed by municipal, district and metropolitan assemblies across the country incur $11 to $20 million to reach the financial closure stage of the projects. Whiles most of the expenditure of the projects are recorded at the construction stage of the projects, pre-construction stage was also found to be a major point of incurring huge financial risks. The analysis of the data with the PLS-SEM model showed positive significant effect of effective financial risk management processes to control financial losses of PPP projects and improve the financial success of the projects. The results have relevant implications for PPP project managers to understand, design and implement financial models that minimise project financial losses and promote the sustainability of PPPs. The research gaps presented in this study will be important for future studies.

Date of Award	2023
Original language	English