Principle 4 - Understand impacts and risks



Effective Public Investment Line 4



To identify social, environmental and economic impacts and ensure value for money
A majority of OECD countries consider the lack of evidence for the choice of investment mix by sub-national governments to be a problem (OECD, 2013). Comprehensive, long-term assessments can help clarify goals and reveal information that can be used to refine investment selection. It is important for appraisals to be technically sound; identify social, environmental and economic impacts; and reveal which investment method is likely to yield the best value for money.

To explore alternatives to investment and assess long-term operational and maintenance costs
Policy makers should also consider policy and project complementarities, as well as alternatives to investment and the efficient use of existing investments to reach particular goals. Long-term operational and maintenance costs should be assessed from the early stage of the investment decision.

To measure different types of risks
Integrating assessment of different types of risks and uncertainty associated with public investment (not only fiscal, such as contingent liabilities, but also financial, political, social and environmental risks), including longer term impacts, are an important part of an appraisal.


  • Use technically sound appraisals, with more rigorous assessment for larger or risky projects (all levels);

  • Inform all partners about the appraisal results (all levels);

  • Take advantage of expertise in organisations with independence experience and a good reputation for technical analysis (all levels);

  • Use independent assessments of ex ante appraisals  (all levels);

  • Circulate guidelines for project appraisal at all levels of government (all levels).


  • Focus on the cashflow projections only, ignoring other economic, environmental and social costs or benefits.

  • Ignore new information that changes the investment approach after a decision has been made.

  • Under-assess alternatives to investment.



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See real life examples on how countries have been putting this principle into practice. Read more


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Country profiles on how they have been using the toolkit to assess public investment capacity . Read more


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Indicators and self assessment questionnaire on this principle. Read more



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