Risk response to project financing risk

1, credit risk. In project financing, the lender should evaluate the credit, performance and management skills of the project participants even if there is a certain recourse to the borrower and the project sponsor, because these factors are the guarantee for the success of the project on which the lender depends.

2. Completion risk. Cost overrun risk, delay risk and quality risk are the main risk factors affecting project completion. The methods to control them are usually carried out by the project company using different forms of "project construction contract" and the loan bank using "completion guarantee contract" or "commercial completion standard".

3. Production risk. Reducing this risk can be achieved through a series of financing documents and credit guarantee agreements. Design different contract documents according to different types of production risks. The risks of energy and raw materials can be prevented and eliminated by signing long-term energy and raw material supply contracts. The resource risks caused by resource projects can be controlled by minimum resource coverage and minimum resource reserve guarantee. For technical risks in production risks, lending banks generally require that the technologies adopted in the project are mature production technologies that have been confirmed by the market, which are successful, reasonable and have successful precedents.

4. Market risk. Market risk runs through the whole project. In the project planning stage, investors should do a good job in market research and market forecast to reduce the blindness of investment. In the construction and operation stage of the project, the project should sign a long-term raw material supply agreement and product sales agreement. The project company can also get some credit support from other project participants, such as the government or local industrial departments, in order to spread the market risk of the project. To a certain extent, market risks are shared by the three parties.

5. Financial risks. The control of financial risks mainly uses some traditional financial instruments and new financial derivatives. The traditional financial risk management is to determine the capital structure of the project according to the predicted risk. New financial derivatives can adopt forward contracts, swaps and cross-currency swaps.

6. Political risks. Collect and analyze political, financial and tax policies that affect the macro-economy, make political predictions about the future and avoid risks. You can also transfer and reduce the losses caused by such risks by insuring political risks with official institutions or commercial insurance companies.

7. Environmental risks. Project investors should be familiar with the laws related to environmental protection in the country where the project is located, and environmental risks should be fully considered in the feasibility study of the project; Draw up an environmental protection plan as a prerequisite for financing, and take into account the environmental control that may be strengthened in the future; Carry out environmental assessment according to the changes of environmental protection legislation, and bring environmental assessment into the continuous supervision scope of the project.