Sterling Risk Sentiment Construction Index shows risk exposure perception remains stable
Concerns about risk exposure in 2016 remain stable. That is the consensus of the latest “Sterling Risk Sentiment Index,” which shows that most report improving profit margins, while others say their concerns about staffing are decreasing. The No. 1 business risk is access to adequate numbers of employees, the report found.
According to the report, companies say “risk sentiment” remains steady at 4.4 on a scale of 1-10 (it was at 4.4 at the end of 2015 as well).
For the first time since the “Sterling Risk Sentiment Index” was conducted in 2015, it has not seen a significant improvement in the perceived risk among construction companies. That’s alongside numbers that show a drop in their year-to-year pipeline of opportunities and profit margins that are significantly down from last year.
The index, which surveyed 86 top executives in Atlanta’s construction industry, noted other key issues of concern. Financial & cash flow issues saw a significant jump (up 8 percent), with increased competition and government regulation remaining high.
Highlights from the “Summer 2016 Sterling Risk Sentiment Index” include: (Note: Where noted, comparisons are with the 2015 Index)
- The No. 1 risk issue overwhelmingly remains staffing, with construction companies struggling to have enough employees to handle projects. But the percentage is at 47 percent, down from 60 percent in Fall 2015 Risk Index. Economic issues ranked a distant second at 20 percent.
- Staffing again was the issue companies reported they felt least prepared to deal with right now (30 percent). Health care costs were next (15 percent), followed by cash flow and financial issues (9 percent).
- 64 percent say their company’s exposure for risk is lower than a year ago, a drop from December’s 71 percent.
- 86 percent of respondents say they have formal strategies in place to manage their risk, up from 74 percent in December.
- 75 percent have reviewed their risk management plans in the last 12 months, down from 69 percent.
Additional survey results include:
- 84 percent say their profit margins are better today than a year ago
- 88 percent say their pipeline of opportunities is better today than a year ago
- 78 percent say they are able to build adequate contingencies into their project budgets
Sterling Risk Advisors is a full-service risk brokerage firm with strong expertise in the construction industry. The firm first surveyed construction industry risk sentiment in February 2015. Sterling surveys the construction industry’s risk sentiment on a semi-annual basis, allowing it to follow and compare local industry trends. CCR
Doug Rieder is principal and the head of construction practice at Sterling Risk Advisors in Atlanta.