Managing Financial Risk in Construction Projects through

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Managing Financial Risk in Construction Projects through Cloud Technology. Keep Costs Low and Improve Profits, Today s construction industry is filled with uncertainty Regardless. of the type and size of a construction project firms are at risk of. Top performing increased costs restrictive regulatory oversight and difficult. construction firms relationships with suppliers and subcontractors These risks can. originate on site or through back office functions such as finance. leverage cloud based Thus it becomes incredibly difficult for leading construction firms. project portfolio to make holistic decisions enabling the delivery of projects on. time and under budget,management solutions, To combat these challenges top performing construction firms. to more effectively, leverage cloud based project portfolio management solutions that. manage project provide real time visibility into project data along with essential. financial information As a result these organizations can more. timelines and costs effectively manage project timelines and costs share information. share information with with subcontractors suppliers and customers and ensure. payments are made within policy and process standard. subcontractors compliance This report will uncover the challenges facing. suppliers and construction firms today and the ways they improve operational. efficiency and financial discipline through cloud based solutions. customers and ensure,payments are made, within policy and Risk Dominates the Construction Industry. process standard, A recent survey of architecture engineering and construction.
compliance firms AEC uncovered the challenges that those firms face in. today s business environment Figure 1 These challenges boil. down to a lack of visibility increased costs and elevated risk. www aberdeen com, Managing Financial Risk in Construction Projects through Cloud Technology. Keep Costs Low and Improve Profits,Figure 1 Top Challenges for Construction Firms. Lack of available resources skilled or,Lack of visibility across multiple. Increasing risk exposure across project,portfolios. Inability to determine profit potential,of new projects.
Volatile business conditions market,changes frequently. 0 20 40 60,Percentage of Respondents n 73,Source Aberdeen Group October 2016. Due to a lack of visibility construction firms cannot effectively. manage resources guide projects towards completion monitor. costs or predict profitability Many construction firms simply. don t have easy access to the information they need to make. effective decisions, In an environment hindered by increased regulatory and financial. risk margins may shrink or vanish compliance issues can rear. their ugly head and the impact of poor decisions can be amplified. Today s construction firms must take a holistic approach to. avoiding risk and improving decision making, These organizations are also significantly challenged in their ability. to deliver individual projects on time and under budget Figure 2. Specifically these challenges stem from insufficient project. reporting making it difficult for construction firms to allocate. resources keep a keen eye on costs and communicate with. customers suppliers and subcontractors,www aberdeen com.
Managing Financial Risk in Construction Projects through Cloud Technology. Keep Costs Low and Improve Profits,Figure 2 Top Project Specific Challenges. Project plans and resource scheduling are not aligned 51. Need to use project resources more effectively 37,Contention for limited resources 32. Customers frequently change their mind mid project 30. Inaccurate or insufficient project reporting 15, Low profit margins leave little room for error 11 AEC. 0 20 40 60,Percentage of Respondents n 73,Source Aberdeen Group October 2016. With resources in short supply construction firms must do all they. can to ensure that they are getting the most value out of the. people and materials available to them But without insight into. the demand or availability for these resources it is extremely. difficult to manage costs effectively, When construction firms are attempting to manage costs with.
insufficient reporting it can be difficult to determine profitability. while managing a project and avoiding scope creep to stay within. Lastly insufficient reporting can significantly hinder external. communication Ensuring that customer expectations are met. and that materials from suppliers arrive on time and at the right. cost are not easy tasks Further subcontractors play a crucial role. and must be managed effectively Not to mention there are. compliance issues related to reporting standards as well as. regulatory demands related to materials workers and processes. To avoid these challenges construction firms must improve their. current capabilities to support increased visibility execution and. communication,www aberdeen com, Managing Financial Risk in Construction Projects through Cloud Technology. Keep Costs Low and Improve Profits,Solutions for Improved Construction Management. Clearly construction firms are challenged with increased financial. risk ineffective and inadequate internal and external. communication and lack of insight into essential project. information such as timelines costs and resources To minimize. these challenges leading construction firms are more likely to. have implemented a variety of technology enablers Table 1 For. example to manage financial risk Leaders have implemented. solutions such as project costing forecasting applications expense. management and contract management Leaders also have. access to solutions for procurement and subcontractor. management which helps to improve communication, compliance and financial management There are also solutions. that ensure the right resources are utilized effectively minimizing. costs through more effective project portfolio management. Table 1 Leaders Implement Technology for Managing Costs. Across the Project Portfolio,Technology Leaders Followers. Project Costing 89 64,Document Management 74 60,Budgeting and Forecasting Applications 71 46.
Quoting and Estimating 70 41,Procurement 70 38,Time Tracking Against Projects 68 51. Expense Tracking Against Projects 64 57,Resource Workforce Scheduling 63 47. Contract Management 59 45,www aberdeen com, Managing Financial Risk in Construction Projects through Cloud Technology. Keep Costs Low and Improve Profits,Change Management 52 43. Subcontractor Management 52 41,Source Aberdeen Group October 2016.
By combining this functionality under one roof construction firms. can benefit from a more holistic view of essential project and. financial information facilitating more informed agile decision. Project Portfolio Management PPM solutions Figure 3 are. designed to provide all necessary project information across the. entire portfolio enabling better project execution In fact leading. construction firms are five times as likely to have this technology. deployed in the Cloud This provides the unique ability to access. the solution as long as internet access is available Therefore. data can be accessed remotely both internally or externally i e. subcontractors and customers for improved communication. Through these solutions construction firms gain access to. capabilities that will help them execute projects minimize risks. and increase profitability,Figure 3 Leaders Implement PPM in the Cloud. Leaders Followers,Percentage of Respondents n 73, Project Management Project Portfolio PPM deployed in the. and Reporting Management cloud,Source Aberdeen Group October 2016. www aberdeen com, Managing Financial Risk in Construction Projects through Cloud Technology. Keep Costs Low and Improve Profits,Capabilities for Containing Risk in Construction.
Risk mitigation is a primary goal in the delivery of profitable. construction projects This is best accomplished by providing. visibility into essential project data and making relevant decisions. on an on going basis Fortunately cloud project management. solutions greatly improve access to important project data Figure. Figure 4 A Central Repository for Project Management. Cloud project management No cloud project management. Percentage of Respondents n 135, All project information Central visibility into Real time visibility Real time visibility. is captured in a resource workload into all project into project data and. central repository across projects milestone and information for. schedule status organizational,stakeholders internal. Source Aberdeen Group October 2016, Those with cloud project management solutions are 58 percent. more likely to have all project information captured in a central. repository This means that project managers and other. employees will have on demand access to all relevant data This. will help with resource allocation and utilization as well as. managing schedules and deadlines In an environment filled with. risk easy access to project information will enable decision. makers to act immediately in response to adverse events as they. attempt to prevent additional costs and maintain previously. defined schedules,www aberdeen com, Managing Financial Risk in Construction Projects through Cloud Technology. Keep Costs Low and Improve Profits, Those organizations with cloud solutions also are 70 percent more.
likely to have real time access to project information across the. entire organization further enhancing project execution In. addition Financial risk is the paramount threat to project. profitability Through cloud project management solutions firms. can gain greater visibility and insight into financial data as well as. implement standards that enforce financial discipline and. compliance Figure 5, Figure 5 Avoiding Risk Managing Costs Maintaining Compliance. Cloud project management No cloud project management. Percentage of Respondents n 135, Real time visibility Ability to share and Real time visibility Financial and. into all project integrate data with into project data and regulatory reporting is. budgets estimates the extended information for automated. versus actual costs enterprise partners customers,Source Aberdeen Group October 2016. Through cloud software construction firms can ensure that. accurate timely and relevant financial data is easily available to. stakeholders This transparency must also extend externally to. customers suppliers and subcontractors As a result those with. cloud solutions are over twice as likely to provide real time. visibility into project data for partners customers and suppliers. For example this could mean insight into the timing of payments. They can connect this information to project data to manage. costs due to change orders, Much of the financial information contained within these. solutions is also necessary for financial reporting and maintaining. www aberdeen com, Managing Financial Risk in Construction Projects through Cloud Technology.
Keep Costs Low and Improve Profits, compliance Fortunately those with cloud solutions are 2 4 times. as likely to have automated financial and regulatory reporting. To understand how cloud project management solutions can help. construction firms manage financial risk examine the impact of. these solutions on the payment process We can see from Figure 6. that those with cloud solutions are 98 percent more likely to have. electronic payment workflows Consequently there is more. efficiency and visibility in payment processes These processes will. become centralized and users can more effectively match. invoices to contracts fix errors and react to automated. reminders There is more visibility into how payments are being. made external communication is enhanced and regulatory and. compliance standards can be enforced reducing financial risk For. example construction firms can gain broad visibility into the. status of lien waivers helping to ensure that payments are made. appropriately and to manage a critical risk By automating these. processes construction firms can better manage costs and. exposures as they attempt to deliver profitable projects. Figure 6 Cost and Compliance Management through Improved. Supplier and Contractor Collaboration,Cloud No Cloud. Percentage of Respondents n 84, Electronic Centralized Ability to match Automated Automated. approval invoice invoices to notification of reminders for. workflow management contracts i e errors outstanding items. processes pricing payment exceptions or awaiting approval. terms etc other items,Source Aberdeen Group October 2016. management,www aberdeen com, Managing Financial Risk in Construction Projects through Cloud Technology.
Keep Costs Low and Improve Profits,The Results, Tellingly organizations that have implemented a cloud project. management solution perform better in a variety of Key. Performance Indicators KPIs than organizations that have. implemented only on premise solutions Table 2 Organizations. using cloud solutions saw a 9 percent greater improvement in. time to decision over the past year This shows that they can. make more agile decisions based on more relevant data But what. is ultimately most important is that organizations with cloud. originate on site or through back office functions such as finance Thus it becomes incredibly difficult for leading construction firms to make holistic decisions enabling the delivery of projects on time and under budget To combat these challenges top performing construction firms leverage cloud based project portfolio management solutions that provide real time visibility into project

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