Building risk management strategies into the vertical construction sector
The construction sector has been a perennial underperformer in the New Zealand economy. The sector’s low productivity reflects very challenging operating characteristics: bespoke complex projects requiring unique approaches.
Alongside this, poor risk management can also play a part in low productivity through increased delays and errors, time-wasting, and ineffective problem-solving. Ongoing construction quality issues and high enterprise failure rates are signs that the sector is currently not managing risk as effectively as it could. We surveyed 131 construction contractors to understand how the sector manages risk, and how this impacts productivity. Our findings highlight the focus of the sector on external risks (client changing their minds and design flaws), provide insight into how contractors adjust their margins for different types of risks, and provide evidence that having good risk management practices improves productivity.