Research

Construction Risk Index 2017: Deconstructing risk

50 risks, split into five megatrends, ranked by 350 senior executives

April 18, 2017
| Australia , Canada, China +9 more
  • France
  • India
  • Japan
  • Mexico
  • Russian Federation
  • Spain
  • Turkey
  • United Kingdom
  • United States


The Construction Risk Index analyzes the severity of impact and ease of management of the top 50 risks facing the construction industry. We have grouped risks into five megatrends to best examine how they impact the sector currently and how that impact may change over the next decade.

The research is based on quantitative data and qualitative interviews with some of the world’s leading construction companies around the globe, with an emphasis on six geographic regions.

Results

The findings show that the biggest challenges to the success of construction companies and their projects are heavily influenced by political stability and economic climates. Yet the study reflects an underlying optimism at a crucial time, when technology and talent are poised to transform the industry and deliver efficiencies that have been sought for decades. Some of the key themes to emerge from the research are:

  • Globalization: The global nature of construction, coupled with significant diversification activity and the presence of mega projects, suggests that political instability and economic climates are the biggest challenges to the success of construction companies and their projects.
  • People: The need for talent is likely to have the longest-term impact on the industry. Construction faces the major challenge of attracting the next generation of workers, who want to join companies that value diversity, reward creativity and aspire to be socially responsible in their communities.
  • Innovation: The future will demand more efficiency than ever before in construction. Companies will have to demonstrate their commitment to exploring new ideas, taking advantage of opportunities presented by both technological and cultural innovation.
  • Technology: The myriad of new technologies available to construction has never been greater and, at the same time, has created an entirely new class of risk management, requiring proactive measures to ensure operations remain productive.

The primary risks

The industry's top threats as seen through the eyes of senior executives

Click to enlarge The primary risks

The megatrends:

Geopolitical instability and regulatory change

The most prominent concern for construction executives is geopolitical instability and the resulting changes across the globe. Of greatest concern among construction companies: undesirable changes to government financing, policies and priorities.

Workforce management and talent optimization

The construction industry can be only as effective as its workforce. The study shows that structural challenges related to the workforce, complex contracting decisions and a physically dispersed labor pool add to the inherent difficulties of managing people.

Business model and strategy challenges

The study also shows concerns over increasing competition, access to funding and macroeconomic uncertainty. These factors are forcing construction executives to diversify their business models and operations. Construction executives are finding that they will have to deal with changes that sit outside the boundaries of the industry.

Risks resulting from digitalization and new technologies

The huge growth in emerging technologies has the potential to transform the way the construction industry operates. Many companies have already made strides in digitally enhancing their operations, but this great opportunity is tempered with the risks and challenges, including cyberthreats, that come with the fast-paced adoption of technological change.

Complex operating models in a global business landscape

The biggest concern in this megatrend is the complexity of the labor market and the industry’s dependence on subcontractors or contract labor. Although this is an operational risk, there are evident ties to workforce management. And while there are both benefits and risks to the use of contract labor, there are also opportunities for construction companies that are able to harness innovative ways to manage their workforce.