Why contractual risk management is vital for Asia’s renewable energy projects

The success of a renewable energy project depends on understanding and managing a wide spectrum of risks at every stage, of which contractual risk is among the key concerns for project owners.

While renewable energy presents immense opportunity for Asia in particular, the challenges, complexities, uncertainties, as well as the number of subcontractors, vendors, and suppliers involved in a typical project mean that project owners need sophisticated risk management solutions — especially in regard to contractual obligations — in order to safeguard against potential losses and unexpected costs.

Contractual risk management is also necessary as risk transfer via insurance alone may not offer optimal coverage. This is because renewable energy insurance is transitioning to a mature market, which entails higher costs and increasing constraints for insureds. Hence, it’s vital that renewable energy industry leaders work together with experienced and specialized risk professionals, who can tailor effective solutions to manage contractor risk throughout the project lifecycle.

The contractual risk management framework simplifies the complexities of a renewable energy project into five key components. Project owners can use this framework to assess contractual risk and seek tailored risk management approaches and solutions:

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