Converting Hindsight into Vision
Informal management of risk has been an everyday task for humanity over the centuries from our very first encounter with the sabre tooth tiger. The instinct for self-preservation is a strong driver and continues to influence how day-to-day risks are managed across societies.
In complex corporates more formal risk methodologies is largely a post 2nd World War phenomena with the first ‘Risk Manager’ appointed at Massey Ferguson in 1963. Post war, companies relied heavily on insurance products to meet the costs of unplanned, unbudgeted losses. However, as economic growth accelerated there was a realisation amongst savvy corporates that the mechanism of insurance had shortcomings. At best, insurance products covered part of the total loss and spread losses across more than one accounting period but it had limited impact on controlling risks. An increasing exposure to mass markets, international trade and globalisation heightened the need for a better solution.
With pressure from regulators and shareholders combined with an increasing intolerance towards failure to manage risks, wise corporates looked to formal and systematic means to improve certainty in a wide and ever changing risk landscape. Einstein’s words ‘Clever people solve problems, wise people avoid them’ is a phrase of note.
Construction professionals have a long history of managing projects through uncertainty and disruptions caused by events such as supply chain failure, weather, fire and flood. There is an increasing realisation that when risk hits, or opportunity arises, it is multi faceted and needs a co-ordinated, cross discipline response from main contractors and their supply chain partners.
With Governance, Risk and Compliance (GRC) the current buzz phrase and Enterprise Risk Management not that widespread in the Sector there is considerable room for further value to be gained and for certainty of delivery to be provided to the Sector’s clients irrespective of what disruptions occur during a project’s lifespan.