Over 28% of construction contractors globally believe inflation and economic volatility as their most significant business risk, followed by increased material costs (16%), bidding and contracting risk (13%), hiring and retention risk (11%), supply chain disruptions (9%) and cybersecurity risk (6%), according to a report by leading insurance broker Marsh and global data provider GlobalData.
Major concerns cited by the report include, legal and regulatory risks, insurance and surety challenges, environmental and climate risks, and health and safety risks as global construction industry risks
When businesses were asked about their firms’ responses to managing growing demands for risk, they indicated a variety of strategies are being utilized, with the most prevalent ones being creating greater partnerships with subcontractors and suppliers to share risk (39%), negotiating tighter contract terms in order to realign risk responsibility (34%), and augmenting contingency budget to absorb possible risk-related expenses (31%).
This report provides an overview of the top global construction industry risks that were found in the survey and insights into the tactics that industry peers are pursuing to assist with addressing the concerns.
Among the financial risks, more than a quarter of contractors (28%) identified the current economic situation and inflation as their primary business risk this year. The next most cited risk was increased material costs, mentioned by 16% of respondents.
Despite regional differences in regulatory environments and the ease of doing business, the survey results highlighted the importance of being selective and assessing profitability when bidding for projects.Over two-fifths of the interviewees reported that they are making more exhaustive prequalification and risk evaluation of subcontractors prior to bidding.
On risks of the availability of a qualified workforce, the report states the high turnover among employees is a disadvantage to companies, affecting not just financial viability but also productivity, employee morale, and job proficiency.”Common reasons for turnover include poor management, which can leave employees feeling undervalued and underappreciated, as well as jobs that fail to meet employee expectations.”
Respondents believe that heightened climate and sustainability risks will have a variety of effects on their firms, with increased costs being the most major concern. These risks may arise from the need to decarbonise materials and processes or from additional costs related to extreme weather, such as lost time due to intense rain or extreme heat.
Despite the recognition of these risks, the adoption of climate risk management strategies among survey respondents was low. The most widely used strategies are supply chain and physical climate risk assessments (32% each), followed by incorporating net-zero commitments and targets into designs and plans (29%).
Construction companies should incorporate risk modelling throughout the project lifecycle to identify potential risks that could cause delays and damage, while also improving resistance to climate-related difficulties. Companies can reduce vulnerabilities and improve project resilience by studying past climate data and future estimates.