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Report

Global construction risk review

Navigating a dynamic and ever-changing construction landscape

The construction industry has strong ties to nearly all other industries and accounts for 13% of global GDP. Given its importance to growth and prosperity, effectively navigating the dynamic and changing commercial landscape is crucial. To do so requires those in the construction industry to be aware of and respond to existing and emerging local and global risk issues.

Today, this challenge is arguably more complex than ever. The continued reshaping of global trade — including the imposition of tariffs and other trade-restricting measures and the formation of new trade agreements and blocs — has contributed to an uncertain and unpredictable business environment.

Marsh’s latest Construction Risk Review brings together analysis of major contractors’ annual reports, a survey of more than 230 construction industry professionals, and Marsh expert insight to explore six of the most significant risks facing the sector.

Our report will help you:

  • Gain a deeper understanding of major risks impacting the construction industry, including macroeconomic challenges and the steps businesses are taking to mitigate against them.
  • Make strategic decisions that align with industry trends by providing data-driven insights from analysis of contractor annual reports and global construction industry survey responses.
  • Enhance your organisation's risk mitigation strategies and build greater resilience.
  • Adapt to emerging trends, such as technological advancements and sustainability practices, ensuring your organisation remains competitive and responsive.

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Explore the key points and dive deeper by downloading the report.

Bidding and contracting risk

  • Risk management in bidding: Effective management and consistent recognition of bidding and contracting risks is essential for project viability.
  • Selective bidding practices: Construction businesses are adopting more cautious approaches, conducting thorough prequalifications and more aggressive negotiations on contract terms to effectively mitigate risks.
  • Opportunities for improvement: Many firms are experiencing capital capacity challenges and acknowledge the need for enhanced surety usage and capital management strategies, indicating a strong potential for improvement in these areas.

Climate and sustainability risk

  • Increasing climate risks: Businesses are recognising climate and sustainability as critical risks, driven by more frequent adverse weather events and heightened regulatory pressures.
  • Limited risk management strategies: Despite acknowledging these risks, the adoption of climate risk management strategies among survey respondents was low, with a significant portion still developing or lacking any framework.
  • Cost and supply chain impacts: Firms expect climate risks to significantly affect their costs and regulatory burdens, underscoring the need for proactive management strategies, such as utilising Marsh’s Sentrisk tool to address supply chain vulnerabilities.

Cybersecurity risk

  • Growing concerns: Construction businesses are increasingly worried about cybersecurity risks, recognising it as a significant threat to their operations, especially as digital tools become more prevalent.
  • Adoption of technology: There is a strong trend toward adopting various technologies, such as mobile apps, drones, and cloud-based project management systems, with many contractors planning to expand their use of these tools.
  • Rising cyber threats: As the industry modernises digitally, the frequency and sophistication of cyberattacks are also increasing, with many contractors reporting a notable rise in phishing, ransomware, and data breaches.

Financial risk

  • Primary financial concerns: Financial risk remains the top concern for businesses, as highlighted in both annual reports and survey responses, reflecting ongoing economic challenges.
  • Impact of economic factors: Firms are particularly focused on the current economic climate and inflation, recognising these as significant risks that could affect their business, along with rising material costs.
  • Mitigation strategies: To address financial risks, businesses are implementing various strategies, such as diversifying funding sources, enhancing cash flow modelling, and adopting efficient budgeting processes, while also using risk data and cost quantification to inform their pricing strategies.

People risk

  • Rising people risk: Concerns about people risk, particularly in hiring and retention, have significantly increased, reflecting a growing awareness of workforce challenges in the construction industry.
  • Workforce availability: Businesses are increasingly worried about the availability of a skilled workforce, recognising that high employee turnover negatively impacts financial sustainability, productivity, and overall job expertise.
  • Attraction and retention strategies: To attract and retain talent, firms are focusing on providing career development opportunities and promoting work-life balance.

Supply chain and project delivery risk

  • Understanding project delivery risk: Scheduling delays, unexpected costs, and technical issues are all challenges affecting contractor’s supply chains, further disrupting project completion. Effective management requires identifying potential risks and developing mitigation strategies.
  • Supply chain challenges: Staying on budget and schedule remains difficult due to fragile supply chains, with many businesses reporting that these constraints continue to impact project timelines and costs.
  • Risk management strategies: Firms are focusing on building stronger partnerships with suppliers, negotiating better contract terms, and increasing contingency budgets, while also recognising the importance of crisis management and regular emergency response training to enhance resilience against unexpected events.

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