The Chishui Watershed is an ecological fragile region. The current ecological compensation mechanism in the Chishui Watershed has problems such as single source of compensation funds, insufficient total amount, poor sustainability, and relatively simple compensation mode. For ecological compensation mechanism in the Chishui Watershed, the Public-Private Partnership (PPP) model can potentially broaden the sources of supplementary funding, increase total funding, diversify modes of compensation, and facilitate sharing of profit and allocation of risks between stakeholders. Compared to traditional PPP projects, PPP projects based on watershed ecological compensation involve a more complex risk structure. In order to improve the ecological compensation mechanism of the Chishui Watershed by using the PPP model, correct risk identification and effective risk-allocation are crucial. The key links of PPP project based on ecological compensation in Chishui Watershed are identified, and the main risk factors of each key link are identified. A risk allocation model was established through the cloud theory, showing the risk allocation situation between the public and private partners. The results show that:(1) the process of PPP project based on ecological compensation in Chishui Watershed includes three stages:project preparation, project implementation and project contract termination. 11 key links are identified. There are 26 main risk factors in these key links. (2) The adverse impacts of risk factors on the watershed ecological compensation mechanism or PPP project in the Chishui Watershed are analyzed, along with their sources. (3) The risk allocation proportion between the public and private partners changes at different stages of PPP project. Specifically, during the project preparation stage, the public partner bears the majority of risk factors because of absolute resource advantages; during the project implementation stage, the private partner bears 80% risk factors; during the contract termination stage, private partner transfer the project's management right (or ownership and management rights) to the public partner, so the risk factors are mainly borne by public partner again.