Carillion’s demise illustrates the need for firms involved in the FM sector to carefully manage cost and risk, because the energy world is only becoming more complex, says Lisa Gingell.
Smart cities, smart buildings, industry 4.0 and the move to more decentralised utilities and communications networks is creating a world filled with millions of connected devices and systems.
With the UK’s second largest multinational facilities management and construction services company Carillion entering into liquidation and others feeling the impact, there is no shortage of commentary around the reason for Carillion’s failings and the impact on the wider economy.
City analysts suggest that failure within the business sits around contracts being bid at the wrong price and the wrong risk transfers that were poorly executed and poorly accounted for. Carillion’s position does point to governance, compliance and risk management failures; in simple terms, commercial risk management processes and project controls failed the business.
Commercial resilience
The issues experienced by such large multinationals highlight the need for greater commercial resilience within the FM industry.
This is where we consider data to be key. The ability to collect, store, manage and interpret data provides a platform to drive business decisions as well as maintain business processes.
After data comes the need for collaboration across the whole business, from the estimators to delivery, project managers to finance and the board. Coupled with real-time visibility, from estimation stage and throughout project delivery, this provides insights and analysis, as well as a facility to raise red flags and trigger mitigation plans to maintain margins and meet client expectations.
The continued pressures surrounding companies in the construction industry are driving business to improve the accountability and effectiveness of its operations, financial reporting and information systems by developing holistic commercial risk management programmes. Add to that the push to embed better internal controls and workflow, and the issues with integrating those programs across the business, and you have a complex challenge.
There is no doubt many companies have worked for years to implement these requirements. But they are often inefficient and unproductive, done in departmental silos with disjointed and sometimes conflicting results and using outdated technology.
Take control
A fundamental premise of any business is cash flow. But given the increasingly complex energy and FM sector, this industry in particular must have greater control, real-time management and visibility over what they have promised and what the client expects. That must be coupled with tight management of suppliers and sub-contractors and all the contractual terms in between.
As energy, buildings and communications converge, the way in which we agree contracts, deliver on customer expectations, and ensure commercial resilience starts and stops with strong control measures, programmatic and formal systems as well as cross business, real-time collaboration and visibility.
Because if a 100 year old business can fail despite a fairly traditional business model, managing the complex and converging challenges ahead cannot be taken lightly.
Click here to see if you qualify for a free subscription to the print magazine, or to renew.
Follow us at @EnergystMedia. For regular bulletins, sign up for the free newsletter.
