Ongoing supply chain issues and operational disruptions are the main concerns across the global construction industry, according to Allianz Risk Barometer 2022 respondents from the sector. Business interruption ranks as the top threat for construction companies worldwide (43% of responses), with the consequences of a natural catastrophe event ranking a close second (42%). Fire and explosion follows in third position (24%).
The Allianz Risk Barometer 2022 was published in January 2022 for the 11th time. The annual survey, conducted at the end of 2021, features the insights of 2,650 experts in 89 countries and territories, including CEOs, risk managers, brokers and insurance experts. The number of participants from the construction industry totalled 160.
“The industry is facing a large number of challenges – at the top of which are supply chain bottlenecks and shortages of materials and staff,” says Jonathan Tabor, head of construction and IDI, Regional Unit London & Nordics, at AGCS. Last year, surges in demand were accompanied by disruptions in production and logistics when factories were forced to close following COVID-19 outbreaks, while there was also record congestion at key container shipping ports. The Bernd floods in Germany and Western Europe, as well as weather events in the US and China, also showed the construction industry – as well as other sectors – that secondary hazards such as flooding, heavy rain, thunderstorms, tornados and even winter frost are increasing in frequency and severity and that companies need to become more weather resilient. “Previous once-in-a century events may occur more frequently in the future, even in regions that were considered ‘safe’ in the past. Construction companies must also react to these new possibilities,” says Tabor.
Cyber incidents (23% of responses) climbs one position year-on-year in the construction risk rankings, while shortage of skilled labor (21% of responses) is a new entry in the top five threats. “Hacker attacks, system failures and data breaches are also likely to impact the construction industry in the future as it continues to digitalize,” says Rehan Hussain, Head of Cyber, Regional Unit London & Nordics, at AGCS. Today, the numerous parties involved on a large construction site can be interconnected via various shared IT platforms, which increases their vulnerability. Cyber risks in construction can range from malicious attempts to gain access to sensitive data, to disruption of project site control and associated theft, to disruption of the supply chain and potential corruption of project design data, resulting in delays and ultimately reputational risk for parties involved.
The expected shortage of skilled workers could ultimately affect the quality of workmanship and maintenance levels in construction and increase the susceptibility to errors. An AGCS analysis of nearly 30,000 industry claims studied between 2016 and the end of 2020 shows that construction defects and poor workmanship are a leading cause of losses, accounting for around 20% of the value of claims.
Further information on the results of the Allianz Risk Barometer 2022 can be found here.