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Guiding principle


ALL PARTIES involved with brownfield sites, be it through investment, ownership, develop- ment, remediation or provision of finance or professional advice, are naturally wary of the potential liabilities associated with land contamination and consequently seek to minimise their financial risk exposure.

There are a number of risk management options available, based on transfer, control, reduction or avoidance of risk. Examples include conventional (non-specific) and specialist pollution insurance, captives, contractual conditions (such as collateral warranties and indemnities), corporate restruct- uring and risk financing.

In many cases, companies are not fully aware of the effectiveness of risk management techniques or may not adequately consider, or account for, the risks involved. This is illustrated by the fact that many organisations appear to rely on their consultants' professional indemnity insurance, often without fully appreciating the limits and restrictions of the policy cover.

CIRIA's new research project, Contaminated land: financial control of risk, aims to improve the management of the financial risk associated with contam- inated sites in the UK. This initiative is co-funded by industry and the Department of Environ- ment Transport and the Regions through the Partners in Innovation Scheme. It is being undertaken by LGC, ABROS and the Land Quality Management group at the University of Nottingham under the guidance of a CIRIA-led industry steering group.

The project will review current practice on apportionment of financial risk, and assess the reliability, efficiency and cost effectiveness of available risk management products.

A key output of the project will be a guidance document designed to help industry understand the liabilities and risks associated with sites with known or potential land contamination, and to select effective financial risk manage- ment cover. The findings will also be disseminated during a series of workshops.

The project has assumed even greater importance in the light of recent developments and forthcoming legislative changes, including the recent introduction of FRS12 Provisions, Contingent Liabilities and Contingent Assets. This means certain liabilities for remediating contaminated land should be fully recognised on companies' financial accounts. In addition eventual implementation of the statutory Contaminated Land Regime will introduce retroactive liability for remed- iation of contaminated land, and implementation of Integrated Pollution Prevention and Control is likely to bring financial implications associated with site remediation.

Furthermore, if industry is to meet the government's target of developing more brownfield sites, it is essential that the risks are shared equitably between land- owners, clients, engineers, con- tractors and other stakeholders.

This project is a timely focus to ensure these organisations fully understand financial risk relating to contaminated land.

Dr Paul Nathanail is course director of the EPSRC IGDS MSc course in Contaminated Land Management at the University of Nottingham.

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