Bill Zuurbier, chairman of risk management consultancy, Equib.

Risk centricity is key to achieving net zero infrastructure

More up-front investment in risk management on major projects will help to make the UK’s 2050 net zero target more achievable, argues Bill Zuurbier.

In order for the UK to meet its target of net zero infrastructure by 2050, the CBI said that the government needed to give the construction sector more control and clear regulatory guidelines to support the delivery of its much-anticipated National Infrastructure Strategy. However, a greater risk focus is also essential to support the transition by keeping projects on time and on budget.

So, what exactly does a risk-centric approach involve and how can this be applied to large-scale sustainable projects?

Introduced following the Committee on Climate Change recommendations last year, the government’s net zero target represents a legally binding UK commitment to mitigate the climate crisis. However, with the report emphasising that this goal is “only feasible if policies are introduced to match”, and the National Infrastructure Strategy yet to be published, much more needs to be done to make it a reality. The estimated financial fallout that the UK is expected to suffer from the coronavirus pandemic - £372bn in 2020-21 - is likely to exacerbate this challenge, potentially hindering investment in much-needed sustainable infrastructure.

In response, the CBI has called for government to give clear targets to deliver the National Infrastructure Strategy and specific regulatory guidelines for achieving its net zero mission. However, making risk a greater priority at the outset and throughout the design stage, will also be critical to facilitate informed decision-making by investors and prevent costs from overrunning. 

The increasing size and complexity of many sustainable infrastructure projects means that the risk exposure of contractors has become an important issue. Whereas in the past, risk management and analysis would have been regarded as core skills for project managers, today there is often an over-reliance on bespoke software, with more and more sophisticated tools entering the market to facilitate risk planning and support with communicating key issues to stakeholders. As a result, genuine risk management experience has become harder to come by.

The tendency for project managers to ignore real-world risk was emphasised by renowned mega project expert, Bent Flyvbjerg. He said: “It is not the best projects that get implemented, but the projects that look best on paper. And the projects that look the best on paper are the projects with the largest cost underestimates and benefit overestimates, other things being equal.” 

If steps are not taken to understand the opportunities and threats facing green infrastructure projects, this culture of over-optimism could stand in the way of the UK’s net zero transition. Given the uncertainties resulting from the pandemic, investors are understandably more risk-averse, so presenting them with a realistic view of risks from the planning stages of initiatives is key. This will enable projects to be delivered within budget and to agreed timescales. 

Risk modelling is a valuable technique which can be used to support decision-making when delivering green infrastructure projects; a common example of this is Monte Carlo Simulation. This computerised mathematical technique presents individuals with a number of possible outcomes for different courses of action. A numerical probability is then assigned to each scenario, allowing project managers to understand the potential cost of their risk exposure and inform their decision-making.

Once the government’s long-awaited National Infrastructure Strategy is published, the UK construction industry needs to hit the ground running in order to achieve its environmental objectives and deliver a pipeline of much-needed infrastructure. Upfront investment in risk management at an early stage, combined with risk-centric project management skills, will help to make the 2050 net zero target more achievable.   

Bill Zuurbier is chairman of risk management consultancy, Equib, which specialises in advising teams involved in the delivery of major-scale infrastructure programmes.