Cyber, supply chain and battle for talent key risks for Narim members

Cyber, supply chain and the battle for talent were identified as three of the key risks currently facing Narim members as they seek to help their companies recover from Covid-19 and deal with the broad macro implications of the Ukraine crisis. Albert van Haastrecht, head of the corporate insurance department at construction and engineering company Ballast Nedam and new president of Narim, focused on cyber risk, which is a fast-emerging threat for the construction and engineering sector. “One big risk is clearly the shortage of skilled employees, which is a real problem across Europe in this sector. The other big risk is cyber. Only recently I was talking to a broker who said there are now daily attacks on the supply chain. This is a real problem and needs a concerted effort to better mitigate and model this fast-rising risk. This is a problem that we all face and it needs collective action. We have to make sure our building information models – shared information models developed and maintained across the lifecycle of the building or infrastructure project – are updated to reflect this risk,” he said. Adri van der Waart, director of global insurance at engineering firm Arcadis and former president of Narim, also focused on cyber. “Of course, we still have natural catastrophes that continue to rise in value and severity, and political risk is high currently. Cyber is a big problem because we are always behind the hackers it seems and exposures could be very, very high, especially in construction, engineering and infrastructure. And don’t forget we also still have the challenge of data privacy,” he said. Van Haastrecht said the big worry is that cyber risk potentially runs across the whole supply and distribution chain. “Out on site, you do not need a computer to put buildings together, but the whole process relies on computers now, as in all other sectors. It’s all connected and therefore vulnerable if the risk is not well managed,” he said. Van der Waart agreed. “We have seen how systems can be disrupted and then the whole business comes to a halt. Business continuity could be affected in a minor way or it could be very large. Major attacks have the potential to cause disruptions and cease work for weeks. We can’t live with that level of risk,” he said. Supply chain Supply chain risk is another big headache for risk and insurance managers currently, and particularly so in the construction and engineering sector that is having to deal with scarcity of materials and rising prices across the board. “This is another major challenge for the construction sector and most others. You have the dual problem of securing the materials you need at a reasonable price as they continue to rise. Near-sourcing is a possibility and could be done to ensure that the goods needed are available. One of the main problems in this respect is the trade war between the US and China. I suspect we will see more and more products brought back to Europe,” said Van Haastrecht. “You also have to bear in mind that as the Asian economy develops and matures, the price of labour and material will rise anyway, and that is already happening. So, long-term supply chains will evolve anyway and higher costs will have to be accepted,” added Van der Waart. Talent The former Narim president also warned that the battle for talent is intensifying. “This is a problem across all sectors – hospitality, schools, construction – all are struggling to fill vacancies. We have the lowest unemployment levels ever in many European countries. The unemployment rate in the Netherlands in April was 3.2%, down again from 3.8% in December last year. I saw recently that the ratio of job seekers to vacancies is 1:10! This is also because of the ageing population of course, which is a big problem,” he said. According to Van Haastrecht, the solution to this problem is investment and a marketing push. The rules of the employment game have changed and companies need to adapt, he suggested. “This needs investment by companies and they have to actively go out and seek and attract talent. They need to reach out to the schools and universities and compete. It also needs a marketing effort to make your sector more attractive,” he said. Van der Waart pointed out that this applies as much to the insurance sector as any other. “The insurance sector, insurers and brokers, have work to do this in regard. They need to work harder to attract the right people,” he said. “This is essential because relying on IT systems to do the work is not the answer with larger complex business insurance in particular. We saw the limitations of this approach in recent renewals during lockdowns,” Van Haastrecht agreed. Part of the answer to this challenge is improving corporate image by stressing ESG credentials and therefore becoming more attractive to younger talent, the Narim leadership agreed. “I see recently that the insurers and reinsurers like to address this topic and it’s not just about image. Swiss Re for example has asked us what we are doing on ESG, as part of its underwriting criteria. Also, standards and methods are changing in construction. We are seeing a move towards wood-based construction and away from steel and concrete. This is important because younger people really care about how a company performs from an ESG perspective,” said Van Haastrecht.

Cyber, supply chain and battle for talent key risks for Narim members

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