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How Can You Better Manage Risk To Alleviate Loss?

Managing risk is always a challenge, even more so for top field services firms that are usually managing multiple projects. Poor risk management can result in budget overruns, leading to detrimental results for the firm’s overall portfolio.

In an article on Construction Executive’s website, a 2012 KPMG survey of global engineering and construction executives reveals that more than 50 percent admitted they failed to properly identify risk during project bidding that ultimately caused margin erosion. This emphasizes the need for accurate visibility and forecasts when a project is underway.

For field services companies, help managing risk can be built right into their project and job-costing software. If the company has broken down its project down to the critical cost centers, expected revenue and integrated customer billing schedules, the system should be able to display expected margin in real time. It should also be able to display earned margin to date in real time.

Another key point in the Construction Executive article is the need to balance the workload with accurate forecasts, accounting for capacity and backlogs. These forecasts should be standard practice for every project throughout the entire organization. The last thing an organization needs in the middle of a huge project is to be caught short-handed or over budget.

If there is any deviation from the levels companies have established, these systems can typically red-line those projects and jobs. If firms are able to enter the break-down cost, hours and revenues by month, then they will be able to generate forecasts for labor, equipment and materials across projects. This way you can look three to six months ahead and see whether you are going to be over or under capacity.

You need to be able to evaluate risks and sometimes you can find some of these tools in the project job costing system you already have. Before investing in a new tool, take a look at what your software already offers.

Source: Construction Executive, September 2012