Risk management is human work

“A couple of problem projects slowly drove Heijmans into the red around 2016. This led to difficulties with our financing. Fortunately, our financiers saw that practically all the other projects were financially healthy and placed their trust in us. They did demand us to take measures so a small number of poorly performing projects would not get us into trouble again.

For that reason, they decided to centralise management of Heijmans’ company risk profile. And the Executive Board asked me to become the Chief Risk Officer. First of all, we had to fence off the problem projects. As I knew the background and history, I arranged to meet the clients so we could finalise these projects. After that, I was given more time to handle the question ‘How can we increase our risk awareness in the organisation, starting with the intake of new projects?’”

“It starts with a culture change. For instance, my task to increase risk awareness in the process of responding to a call for tender, led to resistance. ‘If risks are leading, you will never be able to take on projects again’ was an objection often heard within our tender clubs. I talked to them about that. Entrepreneurship means taking risks, but be aware of those risks and whether you are able to bear them, both on a project and on a company level. The latter is important, because in the past we purely assessed risks on a project level. We did not consider their effect on the total project portfolio and company.

Furthermore, at projects we were used to solving problems in a creative and ad hoc manner, saying ‘We will take care of that later, it will be fine’. And that was often the case. If that pays off you for a longer period of time, you become overconfident. This company culture led to highly opportunistic risk assessment.

On top of that, there was a social change taking place, one of hardening and overregulation, which influenced our relationship with clients. The contract became increasingly important and it was not a given anymore that you could manage business through the relationship.”

“It requires a great deal from your organisation, in different areas. An example of this: escalating problems. Heijmans escalated issues with clients rather late. Understandable, as the term escalate has a negative ring to it. Especially in a company like Heijmans with many technical people, problem solvers. If you are unable to solve an issue, it is perceived as incompetence. While there is nothing wrong if you are unable to tackle a problem, but your boss can at that moment. If you escalate matters in time, you will not end up in the trenches.

To ensure that employees voice their worries earlier on, once a month, we discuss all projects from a risk-based point of view with the Executive Board and project teams. This way, we do not only get the information we need, we also ask the project manager: ‘What keeps you up at night?’ And: ‘What can we do to help you?’

This requires transparency. Rather scary, for instance, for management. Project managers are now not only talking with the management of their own business area, but also directly with the Executive Board. This also required a lot from the Board members. You see, you do not immediately condemn or discard the problem your colleague is worried about. Otherwise, he, and the rest of the organisation, will never report a problem again. A welcoming, transparent atmosphere is important, instil confidence.”

“You have to be a ‘project animal’. After all, our risk profile is mainly determined by the sum of individual project risks. That is why you need to know the tricks of the trade when it comes to projects. You could compare a risk officer with a driving instructor: you have been a driver yourself, but now you are in the passenger seat. You can give instructions and, in the worst case, intervene. However, the driver is behind the wheel and determines the direction and speed. At the same time, a risk officer should remain eager to take on projects himself. Do not sit back too much, because then you will lose your focus.

We have deliberately kept our team of risk officers small. Risk management is, first of all, embedded in projects and in line management. A large risk office department could be seen as a controlling police force, which does not work at Heijmans. Risk management is human work. You have to love people and be able to work well together. On top of that, you have to be strong and confident, because you will also experience tricky situations with your colleagues. That is why it is so important to have project experience. It helps you to uncover the real story.”

“There is no doubt that at some point Heijmans will need to be extra alert again, for instance, when internal or external factors are putting pressure on the order book. That peace of mind is needed in order to properly assess risks and to prevent the company from taking on projects in a rash manner. Of course, our memory will help us, it teaches us to choose effectively. As a risk officer, I do not want to be a pessimist. On the contrary, I want to make good use of lessons learned. How do we prevent ourselves from making the same mistakes in new projects? And which projects do suit us?

Our attitude has changes as well: certain risks are no longer acceptable to us at Heijmans. Because of this, we dare to say no to a disproportionate high risk and yes to fair projects. As increasingly more construction companies are doing this, we, as a sector, are entering into a different type of conversation about risk distribution and revenue models. Our relationship with public clients is, thus, changing once again. So, that culture changing is taking place. I am noticing a far greater risk awareness in our organisation. As Heijmans, we are now in a firm position, but it is our communication and transparency on risk appetite which helps us to continue to be a healthy company in the future.”