Infrastructure firms have ‘false confidence’ in risk management

Infrastructure firms across the UK are picking up the pieces after being hit by dozens of supplier failures in financials and health and safety – yet they still remain confident they are successfully managing risk.

Jackie Whitelaw
18 April 2015

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In a market survey, almost three-quarters (73%) of UK infrastructure companies said they were confident the way they managed their supply chain helped them successfully identify and manage risk.

But, in the last 12 months, almost a third (28%) of UK utilities, construction and oil and gas companies had experienced problems due to a supplier’s financial instability.  Almost a quarter (24%) had experienced problems due to a supplier’s poor health and safety practices.

“Safety is paramount to the infrastructure industry ..... But this survey suggests that some companies might be unable to fulfil that responsibility simply because they do not know the risk profile of their suppliers” - Tom Grand, Achilles

The survey found UK infrastructure companies had experienced health and safety issues such as fatalities, falls and cable strikes.  In the months following these incidents, the companies involved were also impacted by financial and reputational damage.

Further, 15% of UK infrastructure firms admitted they did not even know how many of their suppliers were considered to be high risk.  High risk was defined in the survey as those suppliers whose failure could damage a firm’s financial or reputational standing or ability to operate normally.

The market survey was commissioned by Achilles, which manages the pre-qualification and verification communities for the oil and gas (FPAL), utilities (UVDB) and construction (BuildingConfidence) industries in the UK.  The survey was carried out by independent research company IFF which interviewed 71 large UK infrastructure companies, with no links to Achilles, from the construction, utilities and oil and gas industries.

“Safety is paramount to the infrastructure industry and all firms have a responsibility to ensure every employee and subcontractor working on site is able to return home safely to their families. But this survey suggests that some companies might be unable to fulfil that responsibility simply because they do not know the risk profile of their suppliers,” said Achilles regional director for UK and Ireland Tom Grand

“Prevention is key when it comes to minimising risk.  In our experience, the best way to do so is through a combination of gathering comprehensive information on suppliers in business critical areas, assessing each supplier using a risk matrix and performing wide-ranging audits on those deemed to be high risk.

“Risks associated with suppliers can be effectively tackled with working collaboratively to apply common industry standards required of all contractors.  By working in a network, businesses can share the administrative burden of collecting, managing and updating business critical information about suppliers.

“Accurate data about their suppliers means infrastructure companies can make smart decisions about their supply chain to proactively manage and mitigate risk.”