Page 15 - Deconstructing risk
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volatility is treated seriously.        Industries. Diversifying into new         procurement and sending materials to
   “Developed markets, where you        countries can be one way to spread        the site because of terrorism threats.”
                                        the risk of political instability. “In
have a stable legal framework and       order to eliminate the political risk,       A few respondents alluded to the
a currency in which people are          we are diversifying in these markets      terror risk being greater for certain
willing to invest long term – these     and targeting new regions to avoid        projects. Infrastructure, for example,
are the markets where you want          putting all our eggs in one basket."      can be the target of large-scale
to operate,” says García Altozano.                                                attacks. Cheryl Yetka, treasurer of
“When political situations change,      The terror threat                         The Port Authority of New York and
existing plans tend to be reviewed,     Terrorist organizations are active        New Jersey, which focuses on the
which normally translates into a        across the globe, and no region           construction of transport facilities,
lower activity level in infrastructure  has been immune to attacks.               says: “One of the key issues we
development.”                           Construction executives are               see, given the nature of our assets,
                                        unanimous in their concerns about         is terrorism. It’s a risk that we are
   Respondents are especially           terrorist activities.                     addressing on a daily basis. It is a
concerned about how the political                                                 difficult risk to manage because it is
climate in the CEEMEA region will          “I think terrorism has an effect on    constantly changing.”
affect their operations. They scored    all industries, including construction,”
“national security threats – security   says STFA’s Akkaya. “I think                 Threats are not confined
concerns, civil or military unrest,     companies are becoming more               to operations at the job site.
war, terrorism, corruption, crime” as   conservative about doing business         Terrorism can cause problems
their top-rated risk overall.           in certain regions. Terrorism does        across the entire value chain, and
                                        bring many risks, mainly relating to      it has both tangible and intangible
   "In the markets that we are          security. There have been companies       consequences.
targeting, the main concern would       that have experienced supply chain
be political risk,” explains Celal      problems due to the difficulties with        “The political risk mainly affects
Toroglu, general director and board                                               the cost of financing in the country
member at Renaissance Heavy                                                       which makes the projects unfeasible
                                                                                  and shrink the market in the long
                                                                                  run,” says Toroglu. And with the
                                                                                  increasingly random nature of
                                                                                  attacks, it is now more important
                                                                                  than ever to estimate the cost of
                                                                                  potential political risk contingencies
                                                                                  on business operations.

                                                                                  Ten-year outlook
                                                                                  Geopolitical risks and regulatory
                                                                                  changes will continue to challenge
                                                                                  the construction industry over the
                                                                                  next ten years. Respondents say
                                                                                  that risks in this space are top of
                                                                                  mind, with changing regulations
                                                                                  in particular being perceived as a
                                                                                  significant inhibitor to progress over
                                                                                  the coming years.

                                                                                     However, while these risks bring
                                                                                  challenges, they can also present
                                                                                  an opportunity for the industry.
                                                                                  Construction companies with
                                                                                  strategic planning processes that
                                                                                  account for the shifting regulatory
                                                                                  environment globally will be better
                                                                                  positioned to venture into new
                                                                                  geographies and gain economies
                                                                                  of scale.

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