RegNews, Hyderabad : After a year of upheaval, engineering and construction companies are hoping to significantly reduce project failure, by transforming the way they manage risks across their portfolio. “No turning back, An industry ready to transcend”, KPMG’s 2021 Global Construction Survey, shows an industry on the cusp of change. This 13th edition of the Global Construction Survey presents an optimistic outlook, with two-thirds of project owners predicting an expansion in their capital programs, and half of all respondents ‘very’ or ‘somewhat’ optimistic about the future direction of the construction market.
Risk management is central to improving organisational resilience. Sixty percent of the survey respondents say they want to gain a more holistic view of risks, by increasing integration and visibility between enterprise risk management, portfolio risk management and project risk management. And two-thirds plan a moderate or high level of investment in risk management.
Having enjoyed some dramatic advances in remote working and digital collaboration, 43 percent of survey respondents plan to build on this with significant investment in technologies to enhance delivery of capital programs. ‘Adoption of technology’ was also rated as the second most important factor to enable engineering and construction companies to cope with disruptive events. However, faced with a wide range of geographies, fragmented supply chains, and a constant stream of new software, companies can struggle to effectively integrate risk management and project management. Only 16 percent of the executives surveyed say their organisations have fully integrated systems and tools.
The global engineering and construction sector’s efforts to adopt diversity, equity and inclusion appear to be at a nascent stage – although owners have made greater progress than contractors. Only 46 percent of respondents say their organisations have a formal program for building diverse and inclusive teams, and a mere 26 per cent have a formal supplier diversity program. Suneel Vora, Partner – Major Projects Advisory, KPMG in India said, “The pandemic has taught important lessons to businesses implementing capital programs and construction projects around resilience, integrated approach to risk, portfolio management, leveraging diversity, and putting technology to work.
KPMG’s Global Construction Survey 2021 reflects on the views of over 186 global industry leaders to provide specific answers to these aspects. For Indian companies with major capital investments and construction projects, specific actions include collaborative project teams, improved risk sharing, integrated project information systems, common technology platforms, and leadership level commitment to embrace diversity. The time for reshaping business models for capital investments, program and project delivery, and portfolio decisions is now.”
As the industry is emerging from the pandemic, the timing is right to reshape the business models for capital investments, program and project delivery, and portfolio decisions. Owners should explore collaborative and integrated project teaming models, rebalance risk allocation in projects, avoiding excessive risk to engineering and construction companies, who in turn should exercise greater caution in taking on high-risk, fixed price projects.
Establish an independent risk management function for portfolios and projects, reporting into a board-level risk management committee. This provides an extra layer of awareness and comfort over the total level of risk across the project portfolio. At the same time, it’s important to continue to focus on the fundamentals of risk management at all levels of the organisation, with a commitment to a culture of continuous improvement.
Invest in portfolio planning software and a formal, embedded asset management team. This should help ensure that capital allocation decisions reflect the organisations’ wider interests, and that investments in projects generate the optimum ROI. Commit at leadership level to embrace diversity, internally and across the supply chain, forming a dedicated diversity team, setting targets, awarding incentives, and tracking and publishing diversity and inclusion numbers. Bridge the technology gap between owners and engineering and construction companies, with owners investing in shared platforms to enable contractors to access technologies like integrated PMIS, BIM and advanced analytics
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