Risks Of International Construction Market

On April 12th, Engineering News-Record (ENR) hosted the 2012 Global Construction Summit in New York City. The event had an impressive turnout of significant players in the international construction industry as many were attracted to the forum due to the market’s exceptional growth over the past several years. Professionals were interested in hearing what their peers had to say about the industry’s challenges, risks, opportunities and future.

Many of the event’s speakers agreed that the top 6 international construction markets are currently Indonesia, Turkey, China, India, Brazil and Africa. While construction is booming in these countries, the international marketplace has seen its share of challenges over the past several years including a continually unstable economic climate, legal and regulatory changes, and weather and geotechnical-related catastrophes. When ENR correspondents interviewed a few professionals on what they felt the top risks were for the industry going forward, there was a host a different responses such as:

  • Political risks
  • Getting paid on time
  • Increasing competition
  • Calculating pricing effectively
  • Uncertainty of the global environment
  • Different countries having their own unique regulations and legal issues

One professional also added it was important that firms give strong consideration to their standards and expectations and if they can be delivered in a similar fashion in other countries. This ties into a company’s reputation and brand, which is of critical concern to international construction firms according to research conducted by AON One.

In 2011, AON One surveyed professionals in the international construction realm and found that concerns over the risk of damage to a company’s reputation or brand rose from 11th place in 2009 to 3rd in 2011. Other key findings of AON’s research were:

  • The threat of increasing competition jumped from 6th place in 2009 to 2nd place in 2011 outlining many companies’ concern over highly aggressive bidding being done by some firms that is sometimes at or below cost.
  • Concerns over regulatory and legislative changes jumped from 10th in 2009 to 4th in 2011 which includes minimum wage issues, healthcare reform and lack of infrastructure funding.
  • Failure to attract and retain top talent is a concern of 63% of respondents and it is noted as the 5th biggest risk.

AON One’s comprehensive list of the top 10 risks of international construction are outlined in the chart below.

As industry professionals relayed to ENR correspondents at the Global Construction Summit, because risk can come from all directions and from increasingly complicated variables, it is important for all firms to be highly proactive in their risk management. The industry has changed dramatically and what is was five years ago is not how it is today. The market will continue to evolve and companies who are not adapting their business models to the changing climate, demands and risks will not survive.

We look forward to keeping our pulse on the international construction market, watching its growth and how its players re-invent themselves to take advantage of its vast opportunities.

Related Posts: Global Construction Outlook Positive For 2012