Building Resilience to Support Growth in Construction and Real Estate

Strategic Risk Management in a Shifting Landscape

The construction and real estate sector faces a convergence of pressures that are testing its resilience and adaptability. Inflation and interest rate uncertainty continue to disrupt capital flows and project viability. Supply chains remain fragile, strained by geopolitical tensions and commodity price volatility. At the same time, rapid digitalization is exposing new vulnerabilities to cyber threats, while labor shortages and rising competition are making it harder to deliver on time, on budget and at scale.

Yet despite these challenges, the sector is not without opportunity. Demand for data centers, energy transition infrastructure and urban regeneration projects is creating new avenues for growth.

Current Risk Realities: Mounting and Evolving Threats

According to Aon’s Global Risk Management Survey, construction and real estate leaders identify the following risks as the most critical challenges facing their organizations today:

Top Current Risks Facing Construction and Real Estate Organizations

1. Economic Slowdown or Slow Recovery
2. Cash Flow or Liquidity Risk
3. Cyber Attack or Data Breach
4. Commodity Price Risk or Scarcity of Materials
5. Workforce Shortage
6. Business Interruption
7. Increasing Competition
8. Property Damage
9. Major Project Failure
10. Regulatory or Legislative Changes

These risks do not exist in isolation. Economic slowdown fuels liquidity concerns. Commodity volatility exacerbates project failure. Cyber threats disrupt digitalized supply chains. Workforce shortages hinder resilience. Their interactions create a web of complexity that traditional risk frameworks struggle to manage.

Economic Slowdown: The Tip of the Spear

Construction is often the first sector to feel the effects of macroeconomic shifts. The current climate of geopolitical instability, trade tensions and inflation has paralyzed investment decision making. Projects are being postponed or canceled — not necessarily due to recession but because of pervasive uncertainty.

This uncertainty can be more damaging than a downturn, with investors and governments alike hesitant to commit capital when the future is unclear. The result is a slowdown in construction activity, particularly in projects requiring high capital expenditures, with ripple effects across supply chains and regional economies.

Organizations can mitigate this risk by stress-testing project viability under multiple economic scenarios. Diversifying project portfolios and securing flexible financing options can help maintain momentum even during downturns.

Liquidity Risk: A Rising Concern

Closely tied to economic slowdown is the surge in cash flow and liquidity risk. Ranked second in both current and future risk categories, this risk reflects growing anxiety over balance sheets and payment reliability. Contractors are increasingly exposed to delayed payments, cost overruns and financing gaps.

Surety bonds can offer a strategic solution because they preserve working capital, provide contract surety and protect against insolvency. Organizations should also review escalation clauses and payment terms to ensure financial resilience.

Cyber Risk: A New Frontier

Cyber risk remains the third most critical threat, and its relevance to construction is growing rapidly. The industry’s digitalization through drones, digital twins, remote sensors and smart supply chains has expanded its attack surface.

Job sites, often remote and lacking robust cyber-security infrastructure, are vulnerable to ransomware and supply chain attacks. The boom in data center construction adds another layer of exposure because these facilities are prime targets for cyber threats. 

Investing in cyber hygiene, endpoint protection and supply chain visibility can reduce exposure. Cyber insurance tailored to construction environments and regular penetration testing are essential.

Commodity Price Risk and Scarcity of Materials: Managing the Unpredictable

Tariffs, inflation and supply chain disruption have made commodity and materials prices unpredictable. Steel, aluminum, lumber and copper have all experienced significant price swings in recent years, with prices remaining well above pre-pandemic levels despite some moderation since their peaks. This ongoing volatility makes long-term project budgeting extremely difficult. 

Real-world examples underscore the challenge. The UK’s Sizewell C nuclear power station saw its estimated cost nearly double — from about £20 billion to £38 billion — following updated risk modeling and inflation adjustments. For projects spanning five to 10 years, such cost escalation can render them commercially unviable mid-build.

Organizations should build flexibility into contracts with escalation clauses and consider strategies such as early procurement or bulk purchasing to lock in prices where possible. Scenario planning and dynamic cost modeling can also help maintain project viability, while developing alternative supplier relationships can reduce the risk of materials shortages or unexpected price spikes.

Looking Ahead: The Future Risk Landscape

While today’s challenges are pressing, the risks on the horizon are equally complex. The sector needs to prepare for a future shaped by intensifying competition, evolving cyber threats and persistent economic uncertainty. Anticipating these risks and building adaptive strategies now will be critical to maintaining resilience and unlocking long-term growth.

Top Risks Facing Construction and Real Estate Organizations in Three Years’ Time

1. Economic Slowdown or Slow Recovery
2. Cash Flow or Liquidity Risk
3. Increasing Competition
4. Cyber Attacks or Data Breach
5. Commodity Price Risk or Scarcity of Materials
6. Workforce Shortage 
7. Capital Availability
8. Regulatory or Legislative Changes
9. Business Interruption
10. Failure to Attract or Retain Top Talent

Workforce Shortage and Skills Gap: A Dual Crisis

The construction and real estate sector faces a dual workforce challenge — marked by both a shortage of labor and a widening skills gap. The industry’s cyclical nature and perceived lack of innovation have made it difficult to attract and retain talent, particularly among younger, tech-savvy professionals. At the same time, a significant share of skilled workers are nearing retirement, creating a looming experience vacuum.

This is compounded by the sector’s increasing reliance on digital tools, modular construction and complex project management, which demand new capabilities. Organizations should work to reposition the industry as a future-focused career path. Investing in reskilling and upskilling programs and creating clearer pathways for advancement can help build a more resilient and capable workforce.

Increasing Competition: A Complex Picture

Competition risk has risen sharply in our 2025 survey’s future risk rankings, jumping 18 places compared to 2023, reflecting a more fragmented and dynamic global construction landscape. This shift is driven partly by a surge in infrastructure investment across key markets, including the U.S. and the Middle East, which has attracted new entrants and intensified bidding pressure. Contractors need to compete not only on price but also on capability, delivery speed and risk resilience.

Technology is emerging as a key differentiator. Firms that invest in digital tools such as building information modeling, artificial intelligence and modular construction techniques are better positioned to meet client expectations and deliver cost-effective solutions. At the same time, workforce shortages and supply chain volatility are placing additional pressure on margins, favoring firms with strong talent pipelines and robust global coordination.

As competition intensifies, the ability to differentiate through innovation, operational efficiency and risk management is becoming critical to maintaining profitability and securing future work.

Five Actions to Help Build Resilience

In today’s complex environment, risk management must evolve from compliance to become a strategic capability. Construction and real estate firms should adopt integrated approaches that address multiple risks at once and support proactive, informed decision making. Here are some actions to consider to help strengthen resilience:

1. Review Contracts and Escalation Clauses

Long-term projects require robust contracts that account for inflation, supply chain disruption and geopolitical volatility. Escalation clauses and liquidated-damages provisions must be carefully negotiated to protect margins and ensure project viability.

2. Use Surety Bonds for Liquidity Protection

Surety bonds offer a flexible alternative to letters of credit, preserving working capital while providing performance security. They are especially valuable in complex, multi-stakeholder projects with high liquidity risk.

3. Increase Supply Chain Visibility

Effective risk management requires visibility beyond direct suppliers, because critical dependencies can lie deeper within the supply chain. Mapping the full supply chain ecosystem enables organizations to anticipate and mitigate risks from geopolitical shifts, cyber threats and natural disasters.

4. Use Risk Engineers and Consultants

Risk engineers and risk consultants play a critical role in helping organizations identify, assess and mitigate complex exposures — particularly in large-scale or mega projects. Their work goes beyond technical modeling; it includes deep analysis of project-specific risks, from natural hazards and cyber threats to contractual and operational vulnerabilities.

Crucially, they help organizations quantify exposures and find the optimal balance between risk retention and risk transfer, aligning strategies with overall risk tolerance and commercial objectives.

5. Consider Alternative Risk Transfer

Traditional insurance is often insufficient for large-scale exposures. Alternative risk transfer solutions, such as parametric insurance and catastrophe bonds, can provide tailored protection for construction and infrastructure projects against catastrophic natural perils, including earthquakes, hurricanes, floods and wildfires.

Parametric insurance, in particular, is increasingly used to address weather-related delays and non-damage business interruption, offering rapid liquidity when predefined triggers are met. These solutions are especially valuable for mega projects and portfolios exposed to severe weather and climate risks, where traditional coverage may be limited or unavailable.

Why it Matters

The construction industry continues to face a complex and evolving risk landscape. While challenges persist — from economic uncertainty to workforce disruption — there are also clear opportunities for growth in areas such as data center expansion, energy transition and infrastructure investment. Organizations that embed risk into strategic planning, invest in future-ready talent and adopt innovative risk transfer solutions will be better positioned to build resilience and gain a competitive edge.

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