Cyber, Financial and Labor Top the List of Risks in Commercial Construction
Commercial general contractors and construction managers face a number of risks that keep them up at night. In the 2024 Commercial Construction Risk Report, we surveyed 500 U.S. general contractors and construction managers to identify the key risks threatening their project timelines, operating budgets and safety. Several themes emerged:
Least prepared for the top risks. The survey revealed the most concerning risks are cybersecurity (42%), cost overruns (35%), high interest rates (33%), labor shortage/lack of skilled labor (28%) and the potential for an economic downturn (28%). Notably, the risks for which respondents are least prepared are the same: cybersecurity (40%), economic downturn (38%), cost overruns (33%), high interest rates (32%) and labor shortage/lack of skilled labor (27%).
Cyber is a growing concern. The collaborative nature of construction presents vulnerabilities that cyber criminals can exploit, and the industry is becoming more aware of how these threats can disrupt and derail their businesses. Anything that causes downtime on a jobsite can be costly, from locking up systems and extorting ransoms to diverting funds through vendor impersonation.
Financial pressures are creating challenges. Persistent inflation has led the Federal Reserve to maintain high interest rates, raising the cost of capital. This is problematic not only for project owners who need to fund construction projects, but also commercial contractors looking to expand their capacity to take on more projects. The possibility of an economic downturn was another key concern for survey respondents, as it would exacerbate the industry’s existing challenges. Survey respondents cited high interest rates (40%) and owner contract disputes (40%) as primary factors leading to cost overruns.
Labor shortage continues. The industry’s longstanding issue with a shortage of skilled labor is set to continue, intensified by an aging workforce nearing retirement. This ongoing labor shortage impacts many trades, including electrical, HVAC and heavy construction. The lack of skilled workers can potentially affect the quality of work and jobsite safety.
Mitigating the risks
In an industry plagued with chronic labor shortages and the entry of new, inexperienced workers, continuous risk management and safety training are paramount. Commercial general contractors and construction managers should strive to build and maintain a safety culture within their organizations.
On any project, the owner, general contractor and tradespeople – electricians, carpenters, plumbers, painters and others – must move in lockstep to ensure safety and effective risk management. A jobsite is a beehive of activity, with workers coming into a project at different stages. Consistently discussing and reinforcing site safety best practices is critical to mitigating injuries, minimizing downtime and maintaining high-quality work.
This approach also applies to emerging risks like cyber. For example, the human element in construction can be a significant vulnerability or a critical line of defense against cyber threats. An employee who inadvertently clicks a link in a phishing email can launch malware that leads to a costly incident. Employees who receive training on cybersecurity best practices can avoid such scenarios. Continuous training and awareness programs empower employees to act as a human firewall against cyber threats.
Risk management is not a set-it-and-forget-it exercise, plans need to be reviewed, updated and improved as the jobsite evolves. QBE’s survey found that nearly half (49%) of respondents intend to improve their safety plans over the next 12 months. Respondents also acknowledged that their risk management training needs to be of a higher quality (55%) and more frequent (51%).
Have a question on how to mitigate risk? Contact CMR Risk & Insurance Services for risk management guidance and resources.
Article Published By: businessinsurance.com
Article Published By: Ryan Powers
