report | McKinsey Working Papers on Risk, No. 57
November 2014—While advanced methods for managing and mitigating risks are applied in e.g. the power and financial-services industries, many others still lag behind. In the transportation industry, project volumes can be significantly larger than EUR 1 bn and span across decades. Recent examples show severe failures across the full life cycle, exhibiting large risks caused by complexity of projects. When looking at credit ratings among rail OEMs, large compensation payments could lead to severe shocks in financial health, threatening a company's solvency. Despite this, counterparty risk is generally not part of the supplier evaluation in the rail industry. We therefore propose for rail customers to include minimum rating requirements of guarantors in their contract structures.