Sterling Seacrest Pritchard, one of the nation’s top 100 commercial insurance brokerages, recently released its annual Construction Industry Risk Sentiment Index indicating a lower perceived risk exposure of 4.45 (out of 10) compared to 4.92 in 2021.  Results indicate more construction businesses are implementing a formal risk strategy (82% compared to 69% in 2021) and reviewing their strategy annually (72% compared to 60% in 2021).

The Construction Risk Sentiment Index is conducted each year to provide construction businesses with insight and benchmarking data that is both operationally and geographically significant. The survey was distributed to businesses across the Southeast served by Sterling Seacrest Pritchard and included prime contractors, sub-contractors, and owners/developers. 

 “As the construction industry has adapted, reassessed risk, and increased safety measures over the last two years, it is still evident based on the response that the pandemic, inflation, and supply chain issues continue to directly affect both the construction industry and economy,” said Sterling Seacrest Pritchard Partner Joey Maxwell. “Overall, construction leaders are seeing an increase in profit margins and more business in their pipeline. However, the supply chain and labor market issues are placing a lot of pressure on the construction industry and will likely have an effect on these trends going forward.” 

The Construction Industry Risk Sentiment Index survey asked industry leaders to identify the challenges faced by their businesses over the last year. Top concerns in 2022 include:

• Material costs and delays (93%)

• Staffing/enough employees to handle projects (74%)

• Productivity issues (26%)

• Economic issues (26%)

Last year, surveyed businesses felt they were least prepared to handle staffing shortages and rising material costs and delays in the coming year. These remain the top concerns for businesses in 2022. Supply chain issues and material cost escalations are the primary challenges faced in construction businesses' day-to-day operations across the country. These results emphasize the need for the modern business owner to implement risk mitigation strategies around daily operations to thrive through economic uncertainty. Important strategies to discuss with your insurance & bonding advisor include contract risk management, trade credit insurance products, backlog assessments, and subcontractor default insurance. 

Results also noted that employee retention and employee benefit program strategies are more critical than ever as companies operate during the “Great Resignation.” 75% of participants note increased employee compensation in the past year and 41% provided incentives or bonuses.  While over half of participating businesses experienced employee turnover, 70% of those experienced a turnover of less than 10%. Now is an important time to discuss a strategy to attract and retain top talent in the industry with your employee benefits advisor. 

Key findings from the survey include:

• 86% of participants are seeing an increase in available jobs and projects - an increase from 68% last year

• 82% of participants report the increased price of materials has negatively impacted their bottom line - an increase from 76% last year

• 98% of participants are experiencing project delays - an increase from 73% last year

• 54% of participants were involved in an auto accident in the past year - an increase from 52% last year

Sterling Seacrest Pritchard launched its Risk Sentiment Index series in 2015 to determine how prepared construction companies are to manage their risk.

Maxwell adds, “The Risk Sentiment Index is an extremely important tool for our advisors as we provide solutions and industry expertise for our clients. Understanding where a business’s instability and uncertainty lie allows for the creation of a more effective and holistic risk management plan. The results allow our team the opportunity to hear firsthand from industry leaders and better serve clients through innovative and practical solutions.”

To view the results of the Construction Industry Risk Sentiment Index in its entirety, go to https://sspins.com/2022-construction-industry-risk-sentiment-index.