Page 31 - Deconstructing risk
P. 31

The most important
                                                                                            thing is to make sure
                                                                                            that the velocity of our
                                                                                            innovation remains
                                                                                            always at the vanguard,
                                                                                            because great ideas
                                                                                            are always going to be
                                                                                            replicated at some point
                                                                                            in time at any event

                                                                                                       —Tim Bowen, Director of Strategy and
                                                                                                          Business Development, Costain

   There are                           maintain the competitive advantage we have              “Our plan is to double the size of the business
a whole lot of                         today we need to maintain relevance, and if we       over the next five years,” says one executive.
reasons to be very                     do not then it could be a significant threat,” says  “That will come from organic growth, increasing
positive about                         LeMay. Obviously, it is frustrating for companies    competitiveness and perhaps from M&A activity.
the construction                       with a particular focus on domestic operations       It will hopefully come from some international
industry over the                      to be outbid by new players.                         expansion.” Others suggest that diversification
next two or three                                                                           has become a necessity to compete.
years                                     Says a major contractor: “Sometimes
                                       internationals come in and do not fully                 “We have taken steps to broaden the diversity
               —Brett Phillips,        understand the local conditions for major            of our client base and the geographic locations
                  CFO, Structure Tone  infrastructure projects. The risk is that they come  of our construction,” says another respondent.
                                       in and under-price certain risks and conditions.”    “For the first time in a decade we have to
                                                                                            actually consider international strategies.”
                                          Creating a diverse portfolio is a method often
                                       used by companies to grow their business and            On the finance side, a varied portfolio can
                                       gain new sources of value. In a commoditized         level out profit and loss, providing leeway where
                                       industry such as construction, expanding into        it’s needed.
                                       new geographies and new markets can be the
                                       most efficient means to remain profitable and           “Geographical diversification of your activities
                                       competitive, however discomforting it might be.      tends to soften the cycle effect. You might have
                                                                                            a low time in one given area while others are
                                          Indeed, geographic diversification is a           picking up,” says ACS Group’s García Altozano.
                                       frequent topic in our interviews with executives.    Many respondents use this strategy to maintain
                                       “Diversification makes us more dynamic               a powerful balance sheet.
                                       and more flexible so that it is easy to react
                                       to the changes in market conditions,” says              “Diversification across sectors and
                                       Renaissance’s Toroglu. “ In this way, we also        geographies is the key to try and smooth
                                       substitute business volume reduction in one          out the overall results of the business,” says
                                       country by increasing the volume in another one.     another interviewee.
                                       Furthermore, we are not only diversified in terms
                                       of geography, we are also diversifying ourselves        There are of course hazards involved in
                                       in the sectors and services we provide.”             exploring new lines of business and working
                                                                                            with new people. While the underlying tone of
                                                                                            conversation on this subject is positive, Yetka
                                                                                            of the Port Authority of New York and New
                                                                                            Jersey alludes to the fact that wide and varied
                                                                                            operations will leave a company vulnerable to a
                                                                                            bigger risk profile.

                                                                                               “We are very diverse. Our assets are so
                                                                                            disparate and unique in their operations that the
                                                                                            way we see risk is that it is constantly emerging
                                                                                            and changing – it’s dynamic,” she says.

                                                                                               Choosing the right markets to enter and
                                                                                            people to partner with is extremely important.

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