RiskUKApril2017

Risk Management in the Construction Sector
terms, we were able to soften the blow for our
clients who may need those products within the
next six months, reducing the risk involved.
Product availability risk
When we visit our clients on site, the subject of
product availability often arises. It’s a constant
concern for many that products are not going to
be available when they’re needed, whether
that’s due to last-minute orders or changes in
legislation causing an increase in demand.
One example which affected our customers
was Amendment 3 to the 17th Edition of the
IET’s Wiring Regulations. The revision changed
how professional electricians and contractors
should install wiring in escape routes so as to
prevent them from becoming blocked by the
premature collapse of cabling installations.
As a result, the sole use of plastic fixings and
cable ties no longer complies with the Wiring
Regulations, so our customers are starting to
use stainless steel cable ties and concrete
screws instead. In the event of a fire, they’re
capable of withstanding temperatures of over
500°C, significantly reducing the risk of cable
installations collapsing and causing unwanted
blockages in escape routes.
Initially, we found that the changes brought
about by Amendment 3 took their time to filter
through to contractors on site. However, we’re
now seeing a change in approach. While we’ve
stocked these items for a number of years,
we’ve recently witnessed a 124% year-on-year
increase in stainless steel cable tie sales and a
198% year-on-year increase in concrete screw
sales. This is just one example of how a change
in legislation can dramatically increase the
demand for particular product types.
Another issue our customers face is the fact
that many manufacturers are based in the
Midlands, making it difficult for contractors in
London and the South East to procure large
quantities of stock on a swift basis.
Furthermore, companies working within the
capital often don’t have the capacity to store
stock on site and don’t want to tie up valuable
cashflow in large stockholdings.
In addition, our customers are often affected
by changes in construction schedules driven by
other contractors and may need products
quickly and unexpectedly. Solution suppliers
need to guarantee that 100% of core lines are
always in stock in order to help customers
avoid additional cost and penalties.
In all honesty, it’s also a good policy to let
customers cancel any order up to two hours
before without any charge by way of
acknowledgement that these changes are often
out of their hands.
“The optimism that we saw emanating from many firms in
the construction sector during most of 2016 has now
diminished because of growing concerns about rising costs”
Skills shortage risk
It’s no secret that there’s a skills shortage in the
construction industry which is causing untold
difficulties for many. According to Arcadis, in
order for the Government to meet its housing
targets, the UK needs to recruit up to 400,000
construction workers each year until 2021, with
London and the South East needing to recruit
110,000 individuals alone. That equates to
approximately one worker every 77 seconds.
As a weaker pound has already resulted in
large numbers of Eastern European workers
returning home, contractors are having to pay
their staff more money in order to keep them,
thereby risking further reductions in margins.
The Royal Institute of Chartered Surveyors
(RICS) estimates that, should a hard Brexit take
place, the UK could miss out on an additional
215,000 migrant workers by 2020. On that
basis, the RICS has called on the Government
to prioritise building workers for visas in order
to go some way towards mitigating this risk.
Jeremy Blackburn, head of UK policy at the
RICS, explained: “A simple first step would be
to ensure that construction professions feature
on the Shortage Occupations List. Ballet
dancers will not improve our infrastructure or
solve the housing crisis, yet their skills are
currently viewed as being essential.”
Mitigating risk
There’s no doubt that mitigating risk has played
a big part in shaping the way in which
construction sector companies and their
suppliers operate in this day and age. Many of
our clients consistently have to weigh up the
very real possibility of losing money for every
job upon which they embark. They face onerous
changes in legislation, not to mention
difficulties in procuring last-minute orders and
a looming skills shortage.
All of this is combined with increasingly tight
margins and a tendency by first tier players to
push all of the risk on to sub-contractors by
implementing severe penalties for failures –
such as failed deliveries or supply of the wrong
product – that may be outside of their control.
By working closely with a specialist supplier
who understands the challenges faced by the
business, organisations in the construction
sector can at least mitigate some of those risks,
thereby allowing them more time to focus on
the core business of the day.
Carl Ghinn:
Managing Director of Fixmart
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