Reflections on the interpretation of uncertainty and risk based on the example of PPP scheme

Abstract

There is not one single sector of the world economy and not one geographical region of the world that has remained unaffected by the global financial collapse that took place in the recent past and the long-term crises which it triggered. We can only speculate today how this crisis is likely to provoke changes in economics, a branch of science most directly affected by the above processes. From the very beginning of its existence, economics – unlike other disciplines – strives for objectivity while allowing a variety of ideas to surface and clash. Although both diversity and dynamism are coded on micro- and macro-levels in economic theory, a feature that enables researchers to choose from among different building blocks in order to lay the foundations of their theories, the economic policy of developed countries as well as the business policies of enterprises are usually based on the principles of the very same mainstream trend. Many already hold the view that some basic premises of the mainstream concept have already been disproved by experience. Certain emphases and research directions – if not the basics – are quite certainly going to be influenced both by the events of the world economic crisis and also by its known or estimated consequences. It seems necessary to offer a new interpretation for the concepts of uncertainty and risk, whereas their weight among the content elements also needs changing. It is clearly proven by the experience of the recent past and the present that various dimensions that have often been neglected in theories dealing with risks representing different levels as well as various factors so far treated as residual elements may in the future play a role of key importance with a dramatic impact on actual economic processes. This anomaly is even more relevant to business calculations. Let me refer to the question as to how much weight a possible international financial disaster or a possible state bankruptcy had in the business calculations of a European or an American business enterprise as recently as two years ago, and how much they weigh today. The present study is designed to analyse what techniques are applied by the business and public sectors to manage risks and how they are associated with the known interpretations of uncertainty and risk. The best possible example to illustrate the present practice is to analyse the risk management of PPP schemes, schemes that are based on a partnership agreement between the private and public sectors, because by using this particular example the attitudes of both the business and public sectors can be analysed at the same time and also because in this particular scheme risksharing clearly plays a key role. The example used in this study is the risk matrix recently applied in a higher education project offering a case of flawed risk interpretation and its consequent potential losses