The Biggest Risks Faced by the Construction Industry

Webcor CEO Jes Pedersen introduces COO/President Matt Rossie's new series of articles exploring the key risks facing the construction industry.

February 9, 2022

Strategy / Planning

by Jes Pedersen, Webcor CEO

There is an undeniable and inextricable connection between the construction industry and the business of insurance. These businesses are linked by construction's need to calculate and quantify risk. As an actuary does for life expectancy, we builders need to assess the likelihood of those risks occurring.

In early November, I delivered a keynote address at the IRMI Construction Risk Conference in San Diego. I used this speech to elaborate on four significant risks facing the entire construction industry, risks that could potentially traumatize the industry if we don't take action to address them.

In a way, we have a decided advantage with these four risks: We know what they are. Unforeseen conditions are one of the biggest risks we face in our industry. I remember a project in San Francisco that was a case study of unanticipated conditions. First, we uncovered an old wooden ship 29 feet below the surface, where the old shoreline used to be. We had to stop digging there while proceeding with the rest of the site. Then we ran into lots of bones but maps from the era told us that a butcher shop had stood on the property over 100 years earlier. So we kept digging but, as we got close to the bottom of the hole, a section of shoring wall started to give way. We had to bring dirt back into the site and fill it back up on the one elevation where the road was slipping into the hole.

To deal with all this, we pivoted: We recast our schedule to continue with the foundations where we could, at the tower location, then developed parallel schedules to deal with the unforeseen while finding ways to keep the rest of the project on track.

Pandemic Pivots

As we have faced the COVID-19 pandemic, I found myself remembering that project. COVID-19 has been rife with the unforeseen. Not just the pandemic itself, but dramatic changes to employee expectations of work, amplified social unrest, new evidence of accelerating climate change revealed in the midst of the pandemic, and then new COVID variants.

I want to believe we are at the bottom of the pandemic hole, ready to build ourselves out of it and figure out how to work around the new constraints the industry is facing:

  • Unpredictable and even scarcer skilled labor
  • Major supply chain disruption
  • Economic conditions that could put an end to some projects
  • Climate change impacts
  • Intensified social unrest as people look to business to solve the issues government has not been able to

Any one of these challenges would have been daunting. Lucky us, we get them all at once. All these perils at the same time, making it even more difficult to steer our business and plot a clear path forward.

The solution is to not try to plot that path. Instead, we have to learn what we must do today while being ready to pivot to the next event that threatens to derail us. Learning to be nimble and agile in an industry accustomed to clinging to its old ways represents a challenge by itself. While construction has evolved over the years, our industry has never experienced the kinds of revolutions that have altered industries like farming, manufacturing, travel, and digital technology, to name just a few.

A Revolution-less Industry

Let's look at the clothing industry as an example. Before the 1700s, people owned maybe two sets of clothes. By the 1800s, not only did they have multiple sets of clothing, they were putting cloth over windows, on tabletops, on the floor...textiles were everywhere, available at a fraction of the price of earlier eras. For as long as we have been building things, you would think construction would have undergone its own revolution. We have not. In fact, construction has been mired at the bottom of the heap for the last 75 years when it comes to productivity.

We are ripe for revolution but, like all revolutions, construction requires a catalyst, an invention, an idea to spur it.

Over the next few weeks, Matt Rossie will share some details on the four key risks facing the industry: people, climate change and building green, being purposeful, and employing emerging technologies. Matt has been Webcor's Chief Operating Officer since 2020 and this year, we announced that he is assuming the president's role effective January 1 as I prepare to retire in 2023. You'll find Matt's LinkedIn profile -- and his posts -- here. (You can read Matt's first post about the first risk, unpredictable and scarce skilled labor.) You should connect with Matt to be sure you get notified when his posts in this series appear.

After Matt addresses these four risk categories, I'll return for a concluding post. In the meantime, I'm anxious to hear your thoughts.

Click here to read this article on LinkedIn, where it was originally posted.