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30 April 2020

Covid-19: Managing supply-chain risk in construction

When materials, components or equipment fail to arrive on site, it can be a work-stopping event. Managing this scenario as a risk is a critical part of project risk management and even more important that contractors consider this under Alert Level 3.

Our construction insurance specialists have some practical tips for contractors on how to manage this risk.

As with all risk management, the first step is to quantify the potential issues.

  1. If they were unavailable, which materials could disrupt your project? Can you prioritise them in order of impact?
  2. What supplier/product combinations does the business have that are unique and critical?
  3. Identify what could disrupt delivery of usable materials to your site. With that done, you can put in place controls to reduce the chances of them happening.

Consider:

  • Capacity of supplier, especially if they’re supplying several sites.
  • Errors in ordering, such as quantities, specifications or timing.
  • Transportation disruptions.

Some solutions:

  • A prudent materials inventory can offset the risk of temporary interruptions to deliveries.
  • Find backup suppliers of your essential materials. Agree to contingency terms up-front, rather than ordering when things are desperate.
  • Avoid too much reliance on specific suppliers.

We’ve even seen companies buy or take a significant stake in a critical materials supplier to ensure uninterrupted and preferential supply.

We’re here to help

One of our core responsibilities as a broker is to ensure you have all the information you need to make informed decisions about the risks your business faces. With the effects of Covid-19 being felt in a number of ways by our clients across the country, we wanted to share some advice to help you protect your business during this difficult and unprecedented time.

Our construction team work with dozens of businesses and business leaders in construction including:

  • Contractors
  • Developers
  • Larger property companies
  • Engineers
  • Architects

We specialise in assessing and protecting risk, and helping you to protect your bottom line from unexpected events.

If you have any questions or if you would like to speak to us about construction risk and insurance please talk to your broker.