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Risk Exposure Perception Remains Stable in Construction Industry

Risk Exposure Perception Remains Stable in Construction Industry

 “Sterling Risk Sentiment Index” Indicates Risk Exposure Perception Remains Stable in Construction Industry, As Concerns Over Adequate Staffing Decrease

Politics Impacting Business Risk: 45% Say Election Year Uncertainty Has an Effect; 80% Say a Republican President Would Improve Their Business

ATLANTA, September 7, 2016 – Construction companies remain consistent in their concern about risk exposure in 2016, with respondents reporting in a new survey that their “risk sentiment” has remained steady at 4.4 on a scale of 1-10 (it was at 4.4 at the end of 2015 as well). The latest “Sterling Risk Sentiment Index” shows that most report improving profit margins, but while they say their concerns about staffing are decreasing, access to adequate numbers of employees continues as the No. 1 business risk.

Businesses were also surveyed about how the current election cycle is affecting their businesses. A majority said “election year uncertainty” was having an impact and most felt that the election of a Republican President would improve their business.

“For the first time since we launched the Sterling Risk Sentiment Index in 2015 we have not seen a significant improvement in the perceived risk among construction companies,” said Doug Rieder, president, Sterling Risk Advisors. “That’s alongside numbers that show a drop in their year-to-year pipeline of opportunities and profit margins that are significantly down from last year.”

The survey noted other key issues of concern. Financial & cash flow issues saw a significant jump (up 8%), with increased competition and government regulation remaining high.

Highlights from the Summer 2016 Sterling Risk Sentiment Index

Note: Where noted, comparisons are with the December 2015 Sterling Risk Sentiment Index

  • The #1 risk issue is remains overwhelmingly staffing, with construction companies struggling to have enough employees to handle projects. But the percentage is at 47 percent, down from 60 percent in Fall 2015 Risk Index. Economic issues ranked a distant second at 20 percent.
  • Staffing again was the issue companies reported they felt least prepared to deal with right now (30 percent). Health care costs were next (15 percent), followed by cash flow and financial issues (9 percent).
  • 64 percent say their company’s exposure for risk is lower than a year ago, a drop from December’s 71 percent.
  • 86 percent of respondents say they have formal strategies in place to manage their risk, up from 74 percent in December.
  • 75 percent have reviewed their risk management plans in the last 12 months, down from 69 percent.

The new survey also asked construction companies several general questions:

  • 80 percent of those surveyed said that they’d see an improvement in their business if a Republican was elected President. Just seven (7) percent said Democrat and ten (10) percent said Libertarian.
  • 45 percent said the election year uncertainty affected their businesses. Thirty-seven percent said no and 18 percent didn’t know.

Additional Survey Results

  • 84 percent say their profit margins are better today than a year ago
  • 88 percent say their pipeline of opportunities is better today than a year ago
  • 78 percent say they are able to build adequate contingencies into their project budgets

Sterling Risk Advisors is a full-service risk brokerage firm with strong expertise in the construction industry. The firm first surveyed construction industry risk sentiment in February 2015. Sterling surveys the construction industry’s risk sentiment on a semi-annual basis, allowing it to follow and compare local industry trends.

The Summer 2016 Sterling Risk Sentiment Index surveyed 86 top executives in Atlanta’s construction industry using SurveyMonkey.com. The survey was conducted between July and August 2016.