Risky business: Carillion’s demise a warning for FM firms


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.

That creates continuing and growing demand for specialist contractors and FM professionals to install, integrate, maintain and manage an increasingly complex technological footprint. This means more work and more pressure for this industry; how they propose, agree and deliver contracts will be pivotal to their success.

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 risk management, governance and compliance as well as project controls – from enquiry to delivery and through handover and into warranty – are key aspects for success within the specialist contractor and FM industry. From our experience, businesses that have tight management, or even programmatic systems in place, ensure greatest resilience as they manage the daily risk and the contracts they enter into.

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

Specialist contractors and FMs should take heed and learn from the mistakes of the past and the recent issues experienced by Carillion. Cloud-based systems mean they can programmatically control their projects, manage teams, create cross-department collaboration and provide real-time visibility and analytics; creating a connected and agile work place – and crucially, tackle problems when they emerge, not when it is too late.

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.

  • Lisa Gingell was a co-founder of t-mac technologies, which was acquired by Utilitywise in 2015. She has a background in energy and FM, particularly with software and technology. Lisa is now working with ASQ Solutions, whose econsys project management, commercial governance, risk management and compliance platform is designed for the specialist contractor and FM sector.

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