As Australia’s economy continues to teeter on the edge of outright contraction, businesses across the housing industry face a wider range of risks and challenges than ever before – from workforce pressures and technology to red tape and everything in between.

Proactive risk management, such as having the correct insurance in place, is a crucial factor in running a successful business, and a big part of this is identifying and preparing for current and potential risks.

Aon recently conducted its ninth Global Risk Management Survey, which reveals the risks businesses worldwide are most concerned about today. Around 3000 risk managers, leaders and executives from 61 countries participated in the survey, and Aon has collated global results and Australia-specific findings.

‘By presenting detailed insights into current risks, the survey aims to provide business owners with the information they need to make better decisions in an increasingly complex business environment,’ says Anita Wilson, CEO of HIAIS, which partners with Aon in providing specialist insurance for the housing industry.

Here, we explore what the survey revealed about the primary threats facing Australian businesses over the next three years and how these impact businesses in the housing sector.

Cybercrime

The number-one concern for businesses, globally and in Australia, is cyber-attacks/data breaches. A massive 13.6 per cent of Australian businesses have already incurred losses from cyber-attacks, and 100 per cent of survey respondents stated they have a formal plan in place to deal with this.

‘This speaks to the pervasiveness of cyber risk and mirrors a global trend of growing awareness of the cyber threat landscape,’ Anita Wilson says. While this threat is not specific to the housing industry, any business running digitised systems (i.e. almost all) is vulnerable to cyber-attacks or data breaches.

‘The amount of data collected, stored and shared online by businesses in the building industry is constantly growing,’ Anita says. ‘And while technologies such as project management software and Building Information Modelling (BIM) have improved productivity and efficiency, these technologies also create more entry points for cybercriminals to access sensitive financial data or your customers’ confidential information.’

Regulatory and legislative changes

The second biggest concern for Australian businesses is regulatory/legislative changes, which have financially impacted 9.4 per cent of survey respondents. ‘A key driver for this is the increasing complexity of managing regulatory risk across multiple jurisdictions,’ Anita Wilson says.

This risk category directly impacts the housing industry in a number of ways – burdensome bureaucracy and red tape have plagued HIA members for decades. ‘Changes to building regulations and codes can increase the costs associated with construction,’ says HIA Senior Economist Tom Devitt.

‘Building businesses must also grapple with planning constraints, with many local councils opposing higher density housing development and making approvals processes too demanding and time-consuming. This can significantly delay projects and inflate costs. We’re also seeing developers impacted by infrastructure levies that keep expanding in size and scope.’

Economic slowdown and slow recovery

Almost 50 per cent of Australian businesses surveyed have suffered losses due to the economic slowdown over recent years. The housing industry, in particular, has been weathering this economic storm for several years now, with building activity in some states reaching the lowest levels in over a decade.

‘HIA members have felt the impact of rising interest rates as well as financial regulations that are making it harder for an increasing number of Australians to borrow and for banks to lend to them,’ says Tom. On top of generalised economic pressures, the heavy tax load on property keeps many potential clients out of the market.

‘Stamp duty, surcharges on foreign investors, windfall gains taxes, land taxes and GST – all add up to an industry that is taxed almost as much as tobacco and alcohol.’

Workforce shortages

Rounding out the top five risks faced by today’s businesses are workforce shortages, followed by a failure to attract and retain talent, and 70 per cent of survey respondents said they have had to implement formal strategies to mitigate the impact of staff shortages.

HIA figures show* that across the residential building industry, the availability of skilled workers remains worse than before the pandemic.

‘Trade shortages continue to contribute to rising prices, pushing up the price of new homes,’ Tom says. ‘The price of skilled trades increased by 5.5 per cent in the 2023/24 fiscal year, almost three times faster than the pre-pandemic average.’

He adds that this issue is compounded by a lack of streamlining of visas for in-demand trades. ‘This is especially necessary now, given the increased competition for skilled trades from public infrastructure, mining and other non-residential construction sectors. Other issues impacting our workforce include the overly complex jurisdictional licensing and regulatory requirements for recent migrants to enter the construction industry.’

And, thanks to rising uncertainty across the sector, the number of apprentices commencing apprenticeships in the construction trade has dropped sharply in recent years.

‘Shortfalls in talent, workforce numbers or workers with critical specialised skills not only impedes productivity but can hamper innovation and competitiveness. It can also increase your business’s vulnerability to other risks such as cyber-attacks, regulatory breaches, supply chain issues, business interruption and reputational damage,’ Anita Wilson says.

HIAIS: Your home for construction insurance

‘It’s challenging to run a business in today’s residential construction industry,’ Anita adds. ‘Success comes down to two fundamental questions: How do I protect my organisation from risk and volatility, and how can I continue to grow the business? Now more than ever, organisations will need solutions for risks they can't retain themselves.’

Bringing together expertise in insurance and housing, the team at HIAIS can help you understand your insurance needs to effectively manage these evolving risks and protect your business's financial security. Not sure where to start? Check out the online Puzzle Helper to learn more about your business's potential risks and the available insurance solutions.

Or for a deeper understanding of the risks faced by businesses globally and in Australia, download the 2023 Global Risk Management Survey.

The information provided in this article is current as at the date of publication and subject to any qualifications expressed. Whilst HIAIS has taken care in the production of this article and the information contained in it has been obtained from sources that HIAIS believes to be reliable, HIAIS does not make any representation as to the accuracy of information received from third parties and is unable to accept liability for any loss incurred by anyone who relies on it. The information contained herein is intended to provide general insurance related information only. It is not intended to be comprehensive, nor should it under any circumstances, be construed as constituting legal or professional advice. You should seek independent legal or other professional advice before acting or relying on the content of this information. HIAIS will not be responsible for any loss, damage, cost or expense you or anyone else incurs in reliance on or use of any information in article.