2.4 Legislative requirements
Risk Management is mandatory under legislation for some classes of hazardous facilities and
activities. The Risk Management processes described in this guideline are supplementary to the
standards set by the legislative requirements. They do not replace or supersede them.
3 Risk Management requirements
TAM is part of a larger reform program within NSW aimed at improving value from public sector assets
and increasing productivity in capital works investment. Risk Management can contribute to these
objectives through more economic service delivery, opportunities to reduce uncertainty and costs, and
more effective contingency planning.
3.1 Policy requirements
NSW Government agencies are required to adopt a structured and systematic Risk Management
process within their asset and capital works management procedures.
The policy requirements for Risk Management responsibilities of NSW public sector agencies are as
follows:
Risk Management Plan
For designated proposals, a Risk Management Plan is to be prepared and included in documentation
submitted to NSW Treasury for the Budget Committee of Cabinet. Designated proposals include:
• all new projects valued in excess of $20 million
• all proposals which involve private sector financing
• proposals which are characterised as being significantly sensitive in economic, environmental or
political terms, and
• complex or innovative projects where significant risks in terms of viability, procurement or
Government commitment can be identified.
Where agencies are uncertain as to designated status, they should consult with their Agency
Relationship Manager in NSW Treasury.
Central agencies also retain discretion for designating particular projects as circumstances require.
For Private Sector Participation proposals, the Risk Management Plan should detail the impact on
State Government borrowing requirements and recurrent outlays. Details about Private Sector
participation proposals are outlined in the NSW Government Guideline titled “ Guidelines for Private
Sector Participation in the Provision of Public Infrastructure”. A link to this document is available from
the private sector participation section of this document
Risk Evaluation and Risk Management Responses
For other major asset management activities, including new projects valued from $5 million to $20
million, procurement selection, maintenance and disposal strategies, agencies are required to
undertake risk evaluation and prepare Risk Management responses, but external formal reporting will
not be required.
Risk Management procedures for these activities should form part of the normal asset management
processes and provide input to agency strategic management and planning. In these cases, risks and
their associated management proposals should be evaluated as part of value management studies
and economic appraisals.
Unless exempted by NSW Treasury, all Budget dependent and nominated non-budget dependent
agencies are required to utilise the NSW Department of Public Works and Services to manage the
private sector interface on Capital Projects over $500,000 in value.
Table 1 Policy requirements summary
Projects
Action required
Who by
Application
Designated
Develop a Risk Management Plan
Agency
Report to Budget Committee via Treasury
Input to Agency planning process
$5M - $20M
Identify risks and prepare
management responses
Agency
Input to Agency planning process
(including economic appraisals and value
management studies)
Less than $5M
No formal requirements
Note:
The term “projects” includes any major asset-related activities from feasibility to disposal stages.
3.2 Linkages with Total Asset Management
TAM reflects priorities for whole-of-life asset management, extended planning requirements for new
works and new relationships between services planning and asset procurement activities.
Risk Management needs to be a part of the asset management process as a program or project
progresses. Provisions made to manage risk should be reviewed and updated as circumstances and
risk exposure change over time.
A major project may need several risk studies at the various stages of concept development,
construction, operation and maintenance, and at disposal.
3.3 Integrating with other decision tools
When significant planning decisions are involved, Risk Management should be combined with an
Economic Appraisal (or Financial Appraisal where appropriate) and a Value Management study. Co-
ordination of these tools is depicted at Appendix E.
The Economic Appraisal should include an evaluation of economic, investment and finance risks and
propose suitable management measures. Value management studies should address risk factors
relevant to the topic of the study. This may concern project concept, feasibility, functional and design
aspects or risks associated with the procurement, delivery and contracting arrangements.
The integration of Risk Management with economic appraisal and value management provides a
strong foundation for effective decision-making.
Agencies should apply the Risk Management approach appropriate to the scale of the risk and
reporting should be incorporated within established documentation procedures.
Figure 1 (below) demonstrates the interaction of those tools and how they can complement each
other in the planning process.
Figure 1 Integrating Risk Management
