A long time ago a contracting executive told me that his company had become adept at pricing, winning and completing its projects and that his main job was risk management, even though that wasn’t his title.
Gradually, I understood what he meant. That's one reason why on Tuesday, Feb. 14th we are sending out a new electronic newsletter, ENR Risk Review. It will cover insurance, surety, regulatory compliance, ethics and law.
The risks faced by design and construction companies constitute a major part of managing their businesses, especially when you look at all the different kinds of risks.
There are the normal market risks associated with costs and competition.
But what I’m thinking of now has more to do with payment risk and risk of costly legal disputes. It also has to do with regulatory compliance and risks associated with corruption or ethical lapses.
When you think about it, trouble on any one of these fronts triggers media risk, meaning you and your company land on websites that show up in Google searches. Or flamed by a comment on someone's blog or discussion chain.
As we’ve seen, even some of the best-managed companies in construction ensnarl themselves in trouble, as happened several years ago with Bechtel and Parsons Brinckerhoff on Boston's Central Artery/Tunnel project. The worst risks are the ones you don’t see coming. How else to explain how Derish Wolff, former CEO of Louis Berger, ended up wearing ankle chains in front of a judge at an arraignment in New Jersey?
Because of the need to allocate and finance these risks, I believe a construction contractor’s primary financial relationship, other than with its clients, involves not a bank but insurers and sources of surety credit.
The contractors have pledged to insurance carriers substantial collateral. And with their brokers the contractors discuss finances and projects regularly, even if the broker and insurance underwriter do not require prior approval for all projects.
Designers, too, can't get a cup of coffee without proper insurance coverage.
In the end, risk is the inevitable byproduct of action. So controlling risk doesn't mean refraining from it.
With risks so complex and varied and interrelated, it’s easy for our view of them to become obscured. That’s one of the reasons we decided to publish ENR Risk Review. We hope it serves as a clarifying medium for the risks involved in construction, simplifying sometimes hopelessly technical legal aspects or separating real risks from hyped or inflated ones.
Journalism these days is conversation supplemented by research. Tell us where you think this expanded coverage and focus on risk should be going, and although we can’t do everything we’re asked, we will always be willing to listen.
Richard Korman
