Risks facing the engineering sector
I&C July 2024
IT in Manufacturing
Geoff Tanton.
The engineering, construction, and real estate sector is facing significant challenges in the year ahead, with natural catastrophes, fire and explosion risks emerging as the primary concerns, according to the Allianz Risk Barometer. These are followed by business interruption (28%), macroeconomic developments (21%) and cyber incidents (19%). The report, based on insights from over 3000 risk management professionals and business leaders, highlights the urgent need for proactive risk management and comprehensive disaster preparedness to ensure business continuity and safeguard against potential disruptions.
Natural catastrophes including hurricanes, earthquakes and floods pose a major threat to the industry, causing damage to infrastructure, delaying construction projects, and disrupting real estate markets. With 38% of respondents identifying it as the top risk, the sector must prioritise resilience by adhering to building codes, incorporating climate resilience considerations, and collaborating with stakeholders for effective disaster response planning.
Fire and explosion risks are another significant concern, particularly during the construction phase and in occupied buildings. The report reveals that 31% of respondents consider this risk to be a top priority. To mitigate these risks, the industry must focus on fire prevention measures, including adherence to standards, installation of detection systems and collaboration with experts for emergency response planning.
Business interruption resulting from project delays, supply chain disruptions, and regulatory challenges is also a pressing issue for the sector, with 28% of respondents highlighting it as a major risk. To mitigate these risks, contingency planning and diversification of project portfolios are recommended, alongside leveraging technology for flexibility, and conducting thorough risk assessments.
Macroeconomic developments such as economic downturns, inflation, and changes in interest rates pose a threat to the industry, affecting project financing, demand for construction services and property values. The report reveals that 21% of respondents consider this risk a top concern. To address these risks, the sector must stay vigilant and adapt to changing economic conditions, while also exploring opportunities for growth and diversification.
In an increasingly digital landscape, cyber incidents are becoming a growing concern for the engineering, construction and real estate industry. With 19% of respondents identifying this risk as a top priority, robust cybersecurity measures such as encryption and employee training are essential to protect sensitive data and maintain operational continuity.
“Allianz Risk Barometer 2024 highlights the critical risks faced by the engineering, construction and real estate sector,” said Geoff Tanton, head of Property and MidCorp at Allianz Commercial South Africa. “By implementing effective risk management strategies and disaster preparedness measures, businesses can enhance their resilience and ensure continuity in the face of various challenges.”
The engineering, construction, and real estate sector plays a vital role in driving economic growth and development. As the industry faces an array of risks, it is crucial for businesses to prioritise risk management and adopt proactive measures to protect their assets, employees and reputation.
The Allianz Risk Barometer is an annual business risk ranking. It incorporates the views of 3069 risk management experts in 92 countries and territories including CEOs, risk managers, brokers and insurance experts, and is being published for the thirteenth time.
For more information contact Lesiba Sethoga, Allianz Commercial, +27 11 214 7948, [email protected], www.allianz.com
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