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As anxiety grows in real estate and construction, companies must refocus on risk management
The confidence and optimism that have characterized Canada’s real estate markets in recent years have started to waver, and anxiety is rising among Canada’s real estate and construction companies. Business challenges are growing, and companies face a broad range of competitive, operational, financial, fraud and other risks—some immediate and easily spotted, others much less so. And any one of them could catch a company by surprise and potentially cause a significant crisis.
Companies can avoid such potential crises by being proactive today. As clear skies and calm waters give way to stormier conditions, Canada’s real estate and construction firms should invest in understanding the full range of risks affecting their entire enterprise. Equipped with this knowledge, management teams can then focus on identifying, evaluating, mitigating and monitoring those risks to steer around threats and ride out oncoming headwinds.
Canada’s generally positive real estate environment in recent years has made it easy to forget—or overlook—the fact that real estate and construction entail significant risk. In truth, a wide array of factors pose potentially serious risks to any organization:
However, the greatest risk facing real estate and construction firms may be the “tunnel vision” with which they look at and manage risk every day. All too often, firms manage risk at an operational level, focusing on the issues and risks affecting individual organizational silos. This makes it very hard for management teams to recognize how risks connect to and influence other risks elsewhere in the business—or how risk and strategy intersect. Worse, this kind of tunnel vision can cause companies to miss critical risks and leave themselves exposed to sudden, potentially severe shocks. >As risks rise, action is required
Myriad risks face Canada’s real estate and construction companies. Left unmanaged, these risks can quickly escalate into serious business challenges or even spark a crisis. Taking action now can help firms manage their risks and prevent a truly unfortunate event. Firms can start by focusing on:
Managing risk across the enterprise requires companies to make a significant investment of time and energy. Adopting these and other best practices can ensure that investment is truly effective:
Canada’s real estate and construction companies face a more turbulent future, as confidence and optimism become clouded by a host of factors—some beyond firms’ control, others simply unknown. Firms that don’t make a concerted effort to understand the many risks they face could suddenly find themselves in a crisis situation. Companies need to be proactive: They must invest the time and energy needed to identify the risks facing their entire enterprise, and develop strategies to evaluate, manage and monitor those risks. Taking action today can help firms avoid major surprises and big mistakes—not to mention missed opportunities—tomorrow.
This is the first in a series of MNP perspectives on risk management aimed at Canada’s real estate and construction companies. Subsequent publications will explore enterprise risk management, fraud risk, and restructuring and insolvency risk.
For more information, contact Lee Thiessen, MBA, National Leader, Real Estate and Construction, at 403.263.3385 or [email protected], or your local MNP Real Estate and Construction Advisor.
Related Topics:Fraud; Business Continuity
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