INDUSTRY NEWS
The SA construction industry currently finds itself in an unpredictable macroen v ir onmen t, w i th Fi t ch Solu tions predicting sluggish growth of only 2,4% for 2019. Talk of a looming global recession is causing capital expenditure on largescale construction projects to dwindle,
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sending the industry into a rally to achieve higher levels of risk-readiness to address increasing uncertainty.
18-24% due to risks facing the industry,”
BUILDING A RISK-READY CONSTRUCTION INDUSTRY
says Clarissa Rizzo, business unit manager
spectrum is bringing the pr oblems
involves the following:
for professional risks at Aon SA. “It’s
organisations face when they run into
• Reducing the total cost of a risk by
therefore no surprise that the construc-
capital availability problems into sharp
tion industry reported a 5% increase in
focus. Despite the fact that it is ranked
• Aligning strategic risk management
efforts deployed to increase the industry’s
as the third most pressing risk facing
activities with the risk management
risk-readiness, compared to two years.”
the construction industry, accounts
plan and overall strategic objectives
receivable is often the largest uninsured
of the organisation.
The top three risks facing the construc-
asset on a company’s balance sheet,
• Identifying best practices and applying
tion industry:
constraining cash flows.
“A on’s Glob al Risk Managemen t
Sur v ey sho w s tha t the c ons tr uction industry has experienced a massive increase in reported losses from
1. Economic slowdown/slow recovery
incorporating a value at risk metric.
them to the business.
• Identifying weak practices and taking
The construction industry considers
Mitigating the risk
the risk of an economic slowdown to be
Aon’s Global Risk Management Survey
• Performance benchmarking against
correctional steps.
its top concern. Businesses generally
found that 25% of respondents from the
peers.
tend to reduce or hold back on capital
construction industry have developed risk
“If we compare this year’s survey
expenditure when experiencing economic
management plans to address assessed
results with those of 2017, we see
strife, causing the growth of the industry
and quantified risks, while a further 15%
an overall increase in the proportion
to grind to a halt.
have evaluated risk finance or transfer
of organisations evaluating their risk
2. Cash flow/liquidity risk
solutions. An additional 14% of the
management programmes, with more
This refers to the possibility that an
industry put continuity plans in place.
companies lowering their total cost of
organisation could fail to obtain the cash
“It’s very encouraging to see that
risk [TCOR]. North America proved to be
required to meet short- or intermediate-
87% of respondents say they’ve adopted
the most developed region in this regard,
term obligations. According to CPA
either a formal or partially formal ap-
while the Middle East and Africa use the
Australia, liquidity risk can arise from a
proach to risk oversight and manage-
TCOR measurement proportionally less,”
number of scenarios within the business.
ment at board level, with all companies
says Rizzo.
These include unplanned reduction in
ranging from multi-nationals to SMEs
More organisations are embedding
revenue, business disruption, sustained
placing more importance on risk manage-
risk into the business and looking at ways
reduction in profitability, unplanned capital
ment than before,” says Rizzo.
of turning these challenges into business
expenditure, increase in operational
“The proof, however, is in the pudding,
opportunities. “Larger companies
costs, future debt repayments and
and the questions to ask are whether
are more likely to implement
breach of loan covenants.
their efforts have reduced the prob-
an ef fective risk manage-
3. Capital availability/credit risk
ability or the resulting impact of risks
ment programme than their
The failure of businesses across the
occurring, and how they performed
smaller counterparts, mak-
in comparison with past risk-
ing it crucial for the industry
“Looming global recession is causing capital expenditure on large-scale construction projects to dwindle.” PRECAST | ISSUE ONE | 2020
based incidents.”
– as a whole – to become
T he Aon Risk Maturity
aware of the risks fac-
Index Insight Report found
ing it and actively plan
that organisations with high-
to improve prepared-
er levels of risk maturity gen-
ness, resilience and
erally invest time and effort
sustainability.”
in reviewing the performance and effectiveness of their risk m an ag em en t p r o gr amm e . Measuring its effectiveness
(Left): Clarissa Rizzo, business unit manager for professional risks at Aon SA.
