Page 8 - Deconstructing risk
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Executive summary

A deeper insight into the risks and challenges facing senior construction executives
is crucial to building resilience and creating opportunities

T he role of construction                Fig. 1 | Megatrend rank order                                         to diversify their business models
         has changed dramatically                                                                              and operations. Consistent with
         in recent years. Growth in      Rank order determined by combined risk score                          these worries, the megatrend in third
the developing world, increasing         (severity of impact × ease of risk management)                        place is business model and strategy
numbers of megaprojects, large-                                                                                challenges. Construction finds itself
scale investments in infrastructure                                     Impact Ease of risk Change in impact   having to deal with changes that sit
and globalization of the industry                                         (/10) management over next ten       outside the current boundaries of the
are adding complexities to projects.                                                                           industry, and this is having a profound
Fragmented and sometimes                                                                  (/10) years (/5)     effect on the way things get built.
inadequate workforces, uncertain
regulatory frameworks and political      Geopolitical instability   7.3  6.8  3.7                                 One such concern is the impact
climates, and the inescapable rise of    and regulatory change                                                 of technologies. Many construction
technology have resulted in a host                                                                             firms have already made great
of interconnected risk landscapes        Workforce management       6.2  5.9  3.1                              strides in digitally enhancing their
that impact each other in difficult and    and talent optimization                                             operations, most commonly through
unpredictable ways.                                                                                            3D printing, drones or Building
                                          Business model and        5.3  5.3  2.9                              Information Modeling (BIM). In
   To gain deeper insight into to this     strategy challenges      4.9  4.9  2.5                              addition, the promise of increased
dynamic risk environment, Willis                                    5.0  4.8  2.6                              quality and productivity from
Towers Watson asked 350 senior             Risks resulting from                                                emerging uses of modular methods
executives in the construction           digitalization and new                                                and augmented reality (AR) are
industry to rank the greatest threats                                                                          just now gaining momentum, and
to their businesses – both today                   technologies                                                they pose consequential risks that
and ten years from now. We asked                                                                               cannot yet be accurately measured.
them about their attitudes toward 50       Complex operating                                                   Four of the top ten risks for the
specific risks from five megatrends.         models in a global                                                industry fall under the risks resulting
Subsequently, we conducted in-                                                                                 from the digitalization and new
depth interviews to gain greater          business landscape                                                   technologies megatrend, indicating
insight into the challenges they face.                                                                         that there are challenges as well as
Our goal was to understand how the                                  among the top three in every region        opportunities to innovation.
various stakeholders in the industry                                except North America, which
view their risks, and to use these                                  identifies “capital availability, funding  An interconnected world
findings to build better solutions to                               and liquidity” as the greatest threat.     The rapid growth in populations,
help our clients prosper in uncertain                                                                          continued globalization and
and changing environments.                                             The construction industry can only      increasing scale of megaprojects
                                                                    be as effective as its workforce, so       will be key factors shaping the future
The primary risks                                                   it’s not surprising that the workforce     of the industry. These changing
The most prominent fears for                                        management and talent optimization         market dynamics give reason to
construction executives are the                                     megatrend ranks a close second.            be optimistic. Many governments
geopolitical instability and regulatory                             The industry clearly faces structural      appear keen to encourage
changes that are manifesting across                                 challenges related to the workers          construction as a driver for economic
the globe in a sometimes volatile                                   it employs. Complex contracting            growth, and funding sources are
manner. The top risk, “negative                                     decisions and a physically dispersed       seeking investment opportunities in
changes to government financing,                                    labor pool add to inherent difficulties    construction. But making promises
policies and priorities”, illustrates                               in managing people risks.                  about infrastructure spending and
the industry’s intimate relationship                                                                           then delivering on those pledges
with public spending and the impact                                    Our index also uncovers concerns        are two very different things. Even
of regulations. Geographically,                                     about increasing competition, access       the most effective governments
executives are almost unanimous                                     to funding and macroeconomic               can struggle to get projects
in their concerns. This risk ranks                                  uncertainty. Many executives told us       conceptualized and capitalized.
                                                                    how these factors are forcing them

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