insight

Managing Financial Risk in Construction

Construction projects involve enormous sums of money paid to dozens of companies over multiple months and even years. This begs one major question: how is all of this money managed to ensure that people get paid what they’re owed in a timely manner?

Truthfully, timely payments on construction projects is a major challenge in the industry, both in the US and abroad. The reason? There are such intricate complexities when money changes hands, and given the breadth of the supply chain for a single project, these exchanges are substantial come with limited transparency. As money changes hands, so does risk.

And to complicate things further, more and more projects are becoming joint ventures — often on larger projects — with unique ownership structures (multiple owners, multiple GCs, and a complex web of specialty contractors and suppliers entering the folds). If we think about this scenario, imagine playing the role of one of these…