Marsh Warns UK Construction Sector Failing to Fully Manage Project Risk

A report from Marsh’s London office warns that “the UK construction sector is failing to fully manage the risks associated with large and complex building projects, which can in turn lead to professional indemnity insurance claims.”

Marsh’s warning follows the publication of its new “Industry Risk Footprint” report, which details the 28 most commonly identified ‘project and business’ risks that should feature in the risk registers of construction projects in the UK.

Marsh set out the most common operational, financial, strategic, regulatory and hazard risks to construction projects, as follows:
— Inaccurate design brief/employers’ requirement documentation
• Inadequate risk apportionment between joint venture, consortium and sub-contractor partnerships
— Breach of legislation e.g. health and safety or environmental legislation
— Failure to put the correct financial model in place
— Adverse environmental effects or natural catastrophe

Norman Sinclair, a Risk Consultant in the Strategic Risk Practice at Marsh, explained: “Many large or complex construction projects will involve funding from the public sector, which means that there is a requirement as directed by HM Treasury guidelines for firms to establish a risk-based approach to the allocation and expenditure of monies received.

“However, in our experience, risk registers are not being fully developed and embedded into the project lifecycle in either the public or the private sector. This invariably leads to projects failing to meet the aspirations of its stakeholders in terms of budget and timescales resulting in additional costs to the programme, including claims relating to professional negligence.

“Risk registers need to be living, breathing documents that are reviewed at every stage of a project, providing insight into the issues that the stakeholders may face. Time and again, experience shows that firms which take a more proactive approach to risk identification and management have greater certainty over project costs.”

Source: Marsh – www.mmc.com or www.marsh.com