Page 3 - Deconstructing risk

Methodology

The Willis Towers Watson Construction Risk Index the next ten years. An independent analyst
was compiled from data and insights derived collated the data and Willis Towers Watson
from personal and telephone interviews with 350 supported the analysis.
C-suite executives. Survey participants came from
a broad cross section of industry subsectors and The megatrends represent constituent
geographical regions. categories of individual risk. Individual
risk rankings were generated based on
The interviews gauged the respondents' a composite score, which combined the
perceptions to risk in relation to five megatrends perceived severity of the risk's impact,
established from declarations in annual reports, multiplied by ease of management (ie, impact
to stock exchanges, and through independent × ease = combined risk score). The higher
qualified research. The senior boardroom the score, the greater the perceived risk. A
executives were asked to rank the megatrends megatrend risk score, independent of the
and their associated individual risks across three individual risks, ranks each category of risk
time frames: the present, the next 12 months and by the same method.

THE FIVE
MEGATRENDS

Geopolitical instability Complex operating Workforce management
and regulatory change models in a global and talent optimization
business landscape

Navigating a shifting social As projects become global As the Baby Boomer generation
and political landscape is and interdependent in nature, prepares to retire, companies
a constant challenge for traditional models are becoming across the construction spectrum
construction executives. strained. Contractors are being are facing skills shortages. With
Political instability and forced to adapt both physical the industry being transformed
inconsistent policymaking and labor operations to respond by advances in technology, the
creates stifling uncertainty, to a lower margin and more focus of management is shifting
while the regulatory demanding environment. away from finding enough people
environment becomes towards finding the right skillsets
increasingly burdensome. Risks resulting from and backgrounds, and building
digitalization and new a workplace environment that
Business model and technologies retains their most important people
strategy challenges in an increasingly competitive
marketplace.

The pressure is rising on The unrelenting pace of digitalization Numerical values
construction executives to build and technological advancement in this publication
more dynamic business models has introduced a whole new are always
that are capable of responding dimension of risk. Contractors’ entire represented to
to an increasingly volatile global operations now rely critically on a maximum of one
marketplace. Traditional disruptors IT infrastructure that is vulnerable decimal place.
such as fluctuating foreign exchange to disruption, both incidental and Calculations in the
and interest rates, the availability hostile. Simultaneously, contractors analysis use two
of competitive capital and risk of are facing a wave of unprecedented decimal places.
customer default are being joined liabilities emerging from software and
by new and emerging competitors, nascent technologies.
adding to industry insecurity about
current business models.