Risky Business: Managing Risk in a Time of Global Uncertainty
We live in uncertain times. Just this week, as this issue of CONTRACTOR gets ready to go to press, missiles are (again) flying over the Middle East—some of them American. Aside from the risk to human life (which includes the more than 40,000 service members the United States has in the area) there are the risks to global shipping and a possible spike in energy prices.
Speaking of shipping, the trade war continues with tariffs and counter-tariffs, suits and countersuits and all manner of maneuvering on every side. Despite some jolts earlier in the year the trading markets seem, for the moment, stable. And most contractors remain optimistic about 2025 being a profitable year, according to ABC’s Construction Confidence Index.
But key materials prices are rising, and most of the input price acceleration is due to tariffed materials such as iron, steel and aluminum.
Instability creates uncertainty, and uncertainty means higher risk for everyone dependent on the global supply chain—and given the inter-connectedness of today’s world, that’s pretty much all of us.
Managing risk is a part of everyone’s business plan—it’s why people buy insurance—but how to manage risks on this scale, where so many different factors seem outside of our control?
Luckily (well, maybe “luckily” is the wrong word), history has provided us with an example of instability on a similar scale in the recent COVID pandemic.
In my Q&A with FMI’s Matt Gierke, he draws a number of parallels. Then, as now, prices for essential materials were rising, sometimes astronomically. (The price of lumber, for example, shot up almost 200% between 2020 and 2021.) During the pandemic supply chain disruptions caused extended wait times for materials, sometimes causing construction projects to be delayed for years or even abandoned altogether.
You should read the whole thing, but Gierke’s advice, in a nutshell, is to lock in prices as soon as possible, and to find ways to distribute risk between you, the contractor, and your customers. And that means communication: early, often, and at all levels.
This is our Made in America issue, where we profile manufacturers working, producing and employing all across the USA. Manufacturers are facing many of the same materials price increases, the same supply chain disruptions that contractors are facing.
But paradoxically, the same forces creating that instability are driving a resurgence in domestic manufacturing. When decision-makers look at all the global disruptions—war and trade war, the possibility of another pandemic—the United States seems like the safer, less risky place to manufacture.
Helping that resurgence is a new generation of technology—including advanced robotic automation and AI—that is blunting the advantage foreign production used to have when it came to the price of labor. Moreover, the US has the skilled, tech-savvy workforce to make the most of the new technology.
Add in faster shipping times, a more robust supply chain, a lower carbon footprint, a host of government incentives, and a preference by the American consumer for American-made goods, and you can make a very strong case for manufacturing in, or returning manufacturing to, the US.
As just one example, Viega, a German-owned company famous for its press fittings, is building a new production and distribution facility in Mantua, OH that will officially open in July.
It’s a risky time to be in any kind of business. But if you stay informed you’ll be able to have the smart conversations, and make the smart decisions that will take some of the risk out of your equations.
About the Author
Steve Spaulding
Editor-in-Chief - CONTRACTOR
Steve Spaulding is Editor-in-Chief for CONTRACTOR Magazine. He has been with the magazine since 1996, and has contributed to Radiant Living, NATE Magazine, and other Endeavor Media properties.