Australia’s construction businesses need to adopt a proactive risk management mentality as the sector faces challenges from all fronts, ranging from supply chain pressures to high interest rates and geopolitical tensions, QBE says in a report today.

At the same time, the industry also has to prepare for new regulatory changes around new building standards for energy-efficient homes and environmentally sustainable dwellings, according to the insurer’s Australian Construction Sector Outlook report.

“Geopolitical tensions, domestic pressures such as higher borrowing costs, and workforce shortages are reshaping how the industry operates,” GM of Elders Insurance and heavy industries Dale Gleeson said in the report.

A key theme explored in the report is supply chain management.

“Global trade disruptions and subsequent project delays have heightened the importance of robust contingency planning,” Mr Gleeson said. “Preparedness is essential for navigating this rapidly evolving environment.”

QBE says since 2019 it has seen a 130% increase in average claim sizes across contract works policies for construction companies, demonstrating the need for businesses to closely consider their insurance coverage as part of their risk mitigation strategies.

The need for an effective risk management program has increased even more given the changes in the operating environment in the past few years. 

The report says escalating conflicts in Ukraine and the Middle East could exacerbate supply chain challenges, affecting shipping costs and material availability.

Tensions between major economies such as China and the US may lead to increased sanctions and tariffs on Chinese goods, which could further increase the cost of building.

“Supply chain risk in the construction sector includes various challenges that can disrupt the flow of essential materials and goods for construction projects,” the report said. “This can include difficulties in obtaining building materials, delays in delivery dates, and increases in prices.”

Click here for more from the report.