Insights
29TH JANUARY, 2025
Why MEGA Infrastructure Projects Cost So Much Money: A Financial Risk Analysis
29TH JANUARY, 2025

Fehmarnbelt Tunnel (Denmark-Germany), Rail Baltica (Baltic States), Lyon-Turin High-Speed Rail Link (France-Italy), Hinkley Point C Nuclear Power Station (United Kingdom), and Eglinton Crosstown West Extension (Ireland). These are some of the mega infrastructure projects currently underway in Europe, with a combined value of over £63 billion ($81 billion).
Mega infrastructure projects are among the most complex and ambitious undertakings in the world. Beyond Europe, projects like ‘The Line’ in Saudi Arabia, budgeted at £375 billion (around $500 billion), or Tokyo’s £80 billion ($100 billion) resilience project highlight the astronomical costs of transforming societies through power plants, bridges, tunnels, and high-speed transportation systems. With budgets often rising into billions, these projects aim to deliver long-term benefits but frequently face severe financial inefficiencies.
Having worked on large-scale infrastructure projects myself, I’ve seen first-hand that such financial spend is not inevitable. Instead, it often stems from a failure to adopt a dynamic risk-taking mindset, an approach that integrates opportunity exploitation with robust risk management. By rethinking how risks are handled, these projects can achieve financial efficiency while delivering on their promises. With that said, is it possible to deliver these projects for less? Let’s explore further.
Two Components of Risk That Need to Operate Dynamically For Financial Efficiency in Projects
You barely hear the term risk exploitation being used in any project or organisation, but you hear the term risk management. The reality is that it is impossible to achieve true success on any project (or organisation) without both operating together.
Risk Exploitation focuses on identifying and capitalising on opportunities that can bring project value (including reducing unplanned cost, operational efficiency, delivering new financial benefits, exploiting new opportunities found during the project) both during and after the project has been delivered. The financial reward gained after a project is completed needs to far outweigh the cost investment, known as return on investment over a required period. If the return on investment in a project is lower or at the same level of cost invested in the project, then the project would be deemed a failed project.
Risk Management focuses on identifying, recording, assessing, and mitigating threats, and resolving problems faced that could derail a project, significantly delay the project thereby increasing costs. Effective risk management requires real-time data, scenario planning, and proactive intervention. It must be clear that using so called risk management tools like ARM (Active Risk Manager), Archer, or Predict is not risk management. They are no better than using a notebook or a spreadsheet. A deep understanding of how projects behave due to internal and external threats actions and how to respond to them with the correct controls and actions is fundamental to successfully keeping threats from contributing to ballooning spend. Most mega projects employ risk managers to help them ‘manage risk’ and rely on them to perform quantitative cost risk analysis to produce reports showing cost probabilities largely based on cost assumptions. The truth is that most risk managers or practitioners on mega projects lack the understanding and or experience of risk that can be applied to move the needle in the direction of efficient project delivery. A dynamic risk approach consciously incorporating elements of risk exploitation and risk management, including internal and external resources, can enable mega projects to be delivered without breaking the bank and in most government backed mega projects, tax payers money, such as seen at the UK’s nuclear power station project Hinkley Point C. Let’s look at that briefly.
Hinkley Point C: A Case Study in Cost Waste
Hinkley Point C, Britain’s flagship nuclear power project, serves as a textbook example of financial waste in mega infrastructure projects. Originally budgeted at £18 billion ($22 billion), the project is now expected to cost more than £32 billion ($40 billion), a staggering 77% overrun. Its completion date has been pushed back multiple times, now estimated for 2028 or later, with further delays likely to add billions in inflationary costs and interest payments. Phew! How on earth can this be explained?
Key Contributors to Cost Waste (not peculiar to Hinkley Point C, but most Mega Projects):
- Regulatory and Legislative Red Tape: Lengthy approval processes and evolving compliance requirements often delay projects and drive-up costs.
- Unchecked Contractor Costs: Poor contract management can lead to cost overruns, particularly when deliverables and timelines are not strictly enforced.
- Shortage of Skilled Resources: The global demand for specialised labour in construction and engineering often inflates costs as skilled professionals become scarce.
- Supply Chain Bottlenecks: Delays in procuring materials or equipment, exacerbated by geopolitical tensions, the coronavirus pandemic or market disruptions, can bring projects to a standstill or see projects delayed for years meaning that benefit (return on investment) is impacted and eventually devalued by inflation.
- Unexpected Environmental Costs: For example, Hinkley Point C faced unforeseen bio-marine challenges, such as fish transfer systems to minimise ecological impacts, adding millions to its budget. Unexpected buried services such as cables, pipes and ground conditions can add unplanned costs to project’s budget.
Hinkley Point C is not unique to these financial challenges on MEGA Infrastructure Projects. Mega projects worldwide consistently encounter similar challenges. So, what’s the solution. I don’t have all the answers but let’s look at some.
Three Strategies for Financial Efficiency in Mega Projects Not Usually Used
- Projects Purpose Alignment: is the project aligned with the organisation or the purpose of the state or nation undertaking mega projects? A project must be aligned to a clear purpose. Participants in that project must have an aligned purpose with the project sponsor, project teams (including risk experts, planners, cost estimators, engineers), vendor, partners, contractors must all align with the purpose of the project and how it aligns with the overall purpose of the organisation or State.
- Integrated Risk Performance: I learned something from watching Boom Supersonic recently test their project XB-1 concord-like jet break the sound barrier for the first time yesterday (28th January 2025), what was remarkable was the project teamwork involved in making the planned comeback of supersonic jet, which included Boom Supersonic staff, the military, Starlink and other vendors. What was more remarkable is that there was no dedicated risk manager on the project. The project team knew the risk of the project and executed the activities that would normally be performed by risk managers. Food for thought.
- Scenario Analysis: Scenario analysis helps prevent mega projects from exceeding budgets and ensures efficient delivery by identifying potential problems (threats) and opportunities in advance. By modelling different scenarios such as cost overruns, supply chain disruptions, regulatory changes, or resource constraints, project teams can develop mitigation strategies, contingency plans, and adaptive decision-making frameworks. Given that mega-projects can sometimes run for several years, regularly performing scenario analysis at different intervals throughout the project lifecycle ensures continuous alignment with real-world conditions, improving overall financial efficiency.
Do you think it is possible to deliver embark on and deliver mega projects without overspending? My answer is yes. What do you think?
Look out for new insights every Wednesday.
Thank you for reading.
Take Control of Your Project’s Risk Today
Mega projects come with mega challenges—but risk doesn’t have to be one of them. If you’re a key stakeholder looking for a smarter, more innovative way to manage risk while maintaining financial efficiency and purpose, let’s connect.
Contact me directly at chizubel@chizubelbeluchi.com and let’s start the conversation.
Take Risk. Achieve Purpose!
Your Risk Champ,
Chizubel Beluchi
Ps.
Mental Health in the Construction Sector
Did you know that the suicide rate among men in construction is one of the highest in any sector? At a construction event I attended last December, I was shocked to learn about this statistic. The human cost of mega projects isn’t just financial, it’s also psychological. High-pressure environments contribute to alarming mental health challenges, which, if left unaddressed, can impact productivity and decision-making, further escalating costs. It can get lonely out there onsite. This highlights the urgent need for mental health support in the industry. Men often lack the same level of resources and encouragement to seek help as women do. Providing accessible mental health services and fostering a supportive work environment should be a priority for all stakeholders in mega infrastructure projects without delay.