Risk is inherent in every construction project, especially as many companies confront tighter profit margins in the industry.
Successfully managing these risks means recognising both the potential advantages and pitfalls they present and implementing effective strategies throughout the project. Additionally, factors like labour shortages and supply chain disruptions further compound the challenge of tendering profitably.
While some organisations opt for specialised risk management software to assess their exposure, many overlook the importance of integrating planning, cost control, and finance to address unforeseen changes throughout the project lifecycle.
Enter IFS Cloud—an all-encompassing solution that seamlessly integrates risk management into every phase of the project.
Learn how IFS integrates risk management seamlessly into every phase, ensuring accurate assessment and proactive navigation for your construction projects.
Potential Opportunities, Threats & Risks
Type of Risk Exposure
Risk affects various aspects of a project, directly influencing project delivery, cash flow, and margins. While an initial risk analysis can uncover primary threats and opportunities, unforeseen developments during construction can alter this assessment. Currently, many organisations rely on spreadsheet-based risk registers for project bids, containing manually estimated values susceptible to bias. Despite the allure of large project tenders, their narrow profit margins, sometimes as low as 2%, often lead to unrealistic risk projections due to a focus on securing new business. This approach can inadvertently expose contractors to significant risk.
A Constantly Changing Profile
Accurately evaluating risk during the bidding phase is paramount. It’s not just about profitability; it’s also about understanding the potential impact on the organisation’s overall exposure and cash flow if unforeseen issues arise. Risk is dynamic and evolves throughout a contract. Initially, uncertainty leads to higher risk levels, which decrease as the project progresses and certainty grows. Regularly reassessing the risk register allows for real-time monitoring and the chance to mitigate risks as needed. Contractors should incorporate realistic contingencies into project cost control practices. Different types of risks, such as venturing into unfamiliar business streams or tackling projects outside the company’s typical scope, should also be carefully considered to ensure the organisation has the necessary skills and resources to succeed while balancing potential profits against risks.
Real-time Visibility Matters
Relying solely on multiple separate spreadsheets for critical project information poses significant risks for main contractors. This approach often leads to outdated and fragmented data, vulnerable to manual manipulation and biases. Consequently, the board may lack a clear and accurate understanding of the actual project status, impairing crucial decision-making processes. For larger contracting firms managing multiple projects simultaneously, it becomes imperative not only to track individual project statuses but also to assess the overall business profit margin across the entire portfolio in real-time. This comprehensive insight enables strategic decision-making, guiding the business towards profitable opportunities.
IFS Cloud and Holistic Risk Management
The IFS Risk Management software module isn’t offered as a standalone solution, but instead, it’s integrated into the entire project lifecycle processes. Within the IFS Cloud solution, project cost control, planning, and finance are seamlessly integrated, providing a real-time view of risk threats and opportunities at every stage. The Risk Management module facilitates precise risk calculation, including probabilities, consequences, and financial implications.
By integrating best-of-breed tools, organisations can effectively manage, assess, and control new or unfamiliar capabilities. IFS lobby screen dashboards offer easy visualisation of current or historical risk over time.
For main contractors already using a risk management solution, IFS Cloud seamlessly integrates, allowing stakeholders to update the risk register and review exposure regularly.
With the recent business climate and unexpected material cost increases, there’s a notable industry-wide trend of reduced participation in lump-sum fixed-price tenders. Contractors are increasingly seeking ways to share risks with clients or opting out altogether.
In summary, effective risk management demands real-time visibility and proactive control throughout the construction project process. Embedding access to enterprise-level information enables organisations to build a comprehensive risk profile and analyse past project performances accurately, thereby avoiding costly oversights and minimising exposure in the future.
Ready to reduce risk at every opportunity? Enquire today and speak with one of our team at Wyre Solutions to delve deeper into IFS Cloud.
