Image
Icon

Directory

IconAccounting & Tax
IconActuaries
IconAdministrators
IconAppraisers & Valuers
IconArbitration Services
IconASIB
IconAssessors & Loss Adjusters
IconAssist and Lifestyle Benefits
IconAssociations & Institutes
IconAuditors
IconBBBEE Consulting and Verification Agencies
IconBroker Acquisition Financing
IconBrokers for Brokers
IconBusiness Process Management
IconBusiness Process Outsourcing
IconCall Centre Outsourcing & Sales
IconCompany Secretarial Services
IconCompliance
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconDebit Order Collection Facilities
IconDefensive Driver Training
IconEducation and Training
IconEmergency Medical Rescue
IconFAIS
IconFire, Storm, Flood Damage Specialists
IconForensic Investigation Services
IconHuman Resources
IconIndustrial Cleaners
IconInformation Technology and Software Partners
IconInsurance Companies
IconLegal
IconLightning Damage & Surge Protection Specialists
IconNiche Insurance Products
IconOmbud
IconOutbound Sales
IconOutsourcing Companies
IconPolicy Administration
IconPremium Financing
IconPublic Loss Adjustors
IconPublications
IconRating Agencies
IconReference Books & Material
IconRegulatory Authorities
IconRisk Finance
IconRisk Management
IconRisk Surveyors
IconSalvage Operators
IconSpecialized Claims Investigations & Assessing
IconSurveys and Research
IconTraining Courses & Workshops
IconUnderwriting Managers
IconVehicle Accident Management
IconVehicle and Household Risk Inspection Services
IconVehicle Tracking
IconWellness Programs
IconWholesale Brokers
IconZZZZZZ
Image
  Subscribe To »

Building a risk-ready construction industry

Published

2019

Tue

22

Oct

The SA construction industry currently finds itself in an unpredictable macroenvironment, with Fitch Solutions predicting sluggish growth of only 2.4% for 2019.  Talks of a looming global recession is causing capital expenditure on largescale construction projects to dwindle, sending the industry into a rally to achieve higher levels of risk readiness to address increasing uncertainty.

 

Aon’s Global Risk Management Survey shows that the construction industry has experienced a massive increase in reported losses from 18% to 24% due to risks facing the industry,” says Clarissa Rizzo Business Unit Manager for Professional Risks at Aon South Africa.  “It is therefore no surprise that the construction industry reported a 5% increase in efforts deployed to increase the industry’s risk readiness, compared to two years,” she adds.  

 

Top three risks facing the construction industry:

  1. Economic Slowdown / Slow Recovery 

The construction industry considers the risk of an economic slowdown its top concern.  Businesses generally tend to reduce or hold back on capital expenditure when experiencing economic strife, causing the growth of the industry to grind to a halt.

 

  1. Cash Flow / Liquidity Risk

It refers to the possibility that an organisation could fail to obtain the cash required to meet short or intermediate term obligations. According to CPA Australia, liquidity risk can arise from a number of scenarios within the business. It includes unplanned reduction in revenue, business disruption, sustained reduction in profitability, unplanned capital expenditure, increase in operational costs, future debt repayments and breach of loan covenants.

 

  1. Capital Availability / Credit Risk

The failure of businesses across the spectrum is bringing the problems organisations face when they run into capital availability problems into sharp focus.  Despite the fact that it is ranked as the third most pressing risk facing the construction industry, accounts receivable is often the largest uninsured asset on a company’s balance sheet, constraining cash flows. 

 

Mitigating the risk

Aon’s Global Risk Management survey found that 25% of respondents from the construction industry have developed risk management plans to address assessed and quantified risks, while a further 15% have evaluated risk finance or transfer solutions.  An additional 14% of the industry put continuity plans in place. 

 

“It is very encouraging to see that 87% of respondents say they have adopted either a formal or partially formal approach to risk oversight and management at board level, with all companies ranging from multinationals to SMEs placing more importance on risk management than before,” says Clarissa. 

 

“The proof is, however, in the pudding, and the question to ask is whether their efforts have reduced the probability or the resulting impact of risks occurring and also how they performed in comparison to past risk-based incidents,” she says.

 

The Aon Risk Maturity Index Insight Report found that organisations with higher levels of risk maturity generally invest time and effort in reviewing the performance and effectiveness of their risk management programme.  Measuring its effectiveness involves the following:

  • Reducing the total cost of a risk by incorporating a Value at Risk (VaR) metric.
  • Aligning strategic risk management activities with the risk management plan and overall strategic objectives of the organisation.
  • Identifying best practices and applying them to the business.
  • Identifying weak practices and taking correctional steps.
  • Performance benchmarking against peers.

 

“If we compare this year's survey results with those of 2017, we see an overall increase in the proportion of organisations evaluating their risk management programmes with more companies lowering their Total Cost of Risk (TCOR).  North America proved to be the most developed region in this regard, while the Middle East & Africa use the TCOR measurement proportionally less,” says Clarissa. 

 

More organisations are embedding risk into the business and looking at ways to turn these challenges into business opportunities.  “Larger companies are more likely to implement an effective risk management programme as opposed to their smaller counterparts making it crucial for the industry - as a whole - to get into a space where it is aware of the risks facing it and actively planning to improve preparedness, resilience and sustainability,” Clarissa concludes.

 
Source: CONNY MANASO TS COMMUNICATIONS
 
« Back to previous page Print this page » |
 

Breaking News »

SANDWICH PANELS: A Burning Issue - Understanding the Risk

Sandwich Panel related fires have resulted in major property damage and business interruption losses over the years. What are Sandwich Panels? Sandwich Panels or Composite Panels are structures made ...
Read More »

  

Allianz and Euler Hermes strengthen Africa team

Johannesburg – September 16, 2020 – Allianz Global Corporate & Specialty (AGCS) appointed Asheen Maikoo and Piet Schutte as Senior Risk Engineers on September 1, 2020, to continue ...
Read More »

  

QSURE STEPS INTO COLLECTIONS AND PAYMENTS INDUSTRY AS KEY PLAYER

        Well-known collections and payments company, QLINK Holdings (Pty) Ltd, today announced it has rebranded Insure Group Managers Services (IGMS) to QSURE. Chief Executive ...
Read More »

  

Allianz: Companies face five liability loss trends in the face of the coronavirus pandemic

Johannesburg/London/Munich/New York/Paris/Sao Paulo/Singapore – September 09, 2020 – Liability exposures for companies around the world are increasing. Factors such as rising litigation, collective ...
Read More »

 

More News »

Image

Healthcare »

Image

Investment »

Image

Life »

Image

Retirement »

Advertise Here
Image
Image
Image
Image
Image
Image
Image
Advertise Here

From The Glossary »

Icon

Maximum Probable Loss (MPL):

This is the maximum loss under ideal conditions. In other Lords if a fire occurs and the fire protection measures (e. g. sprinklers), work.
More Definitions »

 

Advertise

 

eZine

 

Contact IG

 

Media Pack

 

RSS Feeds

By using this website you agree to the Terms of Use.
Copyright © Insurance Gateway (Pty) Ltd 2004 - 2020. All Rights Reserved.