# Is the risk worth the reward? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2016-12-01 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Managing Risks and Maximising Rewards in the M&E and Meta Description: Explore the pricing, product availability, and skills shortage risks faced by HVAC and M&E contractors in the construction sector and how Fixmart Ltd can URL: https://financedigest.com/is-the-risk-worth-the-rewardhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/wm2a0841-1186-1736844348644-compressed.jpg) By **Carl Ghinn,** Managing Director of Fixmart Ltd Every business in every sector that tenders for work has to weigh up the potential risks versus the potential rewards. However in the construction, refurbishment and maintenance sector we are increasingly seeing the specialist M&E and HVAC sub contractors, being expected to take a larger chunk of the risk for a lower chunk of the reward. They are also facing an increasing number of challenges that they must overcome in [order to remain both profitable](https://www.financedigest.com/elevator-maker-kone-hikes-outlook-as-q1-profit-orders-beat-forecasts.html "Elevator maker Kone hikes outlook as Q1 profit, orders beat forecasts") and competitive. At Fixmart we work closely with contractors of all shapes and sizes both in HVAC, M&E and general construction and here are some of the issues that they face: **The** [Pricing Risk](https://www.financedigest.com/markets-pricing-some-geopolitics-but-risk-premia-can-grow-further-goldman.html "Markets pricing some geopolitics, but risk premia can grow further -Goldman") [Price fluctuation is one of the major risks](https://www.financedigest.com/putin-sanctions-risk-causing-energy-price-catastrophe-for-west.html "Putin: sanctions risk causing energy price catastrophe for West"). During the tender [process contractors are understandably expected](https://www.financedigest.com/downstream-processing-market-is-expected-to-cross-us-25-4-bn-by-the-end-of-2030-at-a-cagr-of-13.html "Downstream Processing Market is Expected to Cross Us$ 25.4 Bn by the End of 2030 at a CAGR of ~13%") to cost every element, however this is often for projects that may not start for at least 6 months. If their tender is accepted they will be held to this price regardless of any marketplace changes. Yes, in some cases [prices do go down but in the majority of cases they go up leaving the contractor with a much-reduced margin or even a loss](https://www.financedigest.com/wall-street-set-to-open-higher-oil-prices-extend-losses.html "Wall Street set to open higher, oil prices extend losses"). Other industries have different, arguably better approaches, such as a cost plus model, which effectively protects the contractor whilst promoting transparency. For example, in [October the price](https://www.financedigest.com/uk-house-prices-show-unexpected-strength-in-october-nationwide.html "UK house prices show unexpected strength in October: Nationwide") of steel increased by 8%. This was a huge problem for some of our customers but, due to the fact that we follow the [markets closely](https://www.financedigest.com/sodium-cyanide-market-to-close-in-on-us-3-bn-valuation-by-2030.html "Sodium Cyanide Market to Close in on US$ 3 Bn Valuation by 2030"), we had decided to bulk buy a large number of products before this increase. With the additional benefit of our 60-day credit terms, we were able to soften the blow for our clients who may need those products in the next six months subsequently [reducing the risk](https://www.financedigest.com/driving-returns-and-reducing-risk-with-data.html "Driving returns and reducing risk with data") involved. **Product Availability Risk** When we visit our [clients on site the subject of product](https://www.financedigest.com/impact-com-continues-momentum-in-the-first-quarter-fueled-by-client-growth-new-products-and-partnership-events.html "impact.com Continues Momentum in the First Quarter, Fueled by Client Growth, New Products and Partnership Events") availability frequently comes up. It is a constant concern for many that products aren’t going to be available when they are needed. Our customers are often affected by [changes in construction](https://www.financedigest.com/how-technology-is-changing-the-game-in-construction.html "How Technology is Changing the Game in Construction") schedules driven by other contractors and may need products quickly. We guarantee that 100% of our core lines are always in stock to help our customers avoid additional cost and penalties. We also let them cancel any order up to 2 hours before without any change as we acknowledge that these changes are often out of their hands. **Skills Shortage Risk** It is no secret that there is a skills shortage in the [construction industry](https://www.financedigest.com/growth-of-construction-industry-is-creating-demand-for-screw-washer-market.html "Growth Of Construction Industry Is Creating Demand For Screw Washer Market") and this is causing problems for our customers too. Large numbers of Eastern [European workers](https://www.financedigest.com/factbox-what-european-companies-are-doing-as-workers-face-high-inflation.html "Factbox-What European companies are doing as workers face high inflation") have returned home, partly due to the weak pound, and Brexit is also having an effect. This means that contractors have to pay their staff more in [order to keep](https://www.financedigest.com/keep-your-head-in-the-cloud-improving-the-order-to-cash-process.html "Keep your head in the cloud: improving the order-to-cash process") them, thereby risking a further reduction in their margins. We offer our clients a number of pre-assembly options where we part [build their products](https://www.financedigest.com/why-building-new-products-for-a-circular-economy-is-essential-if-we-are-to-preserve-the-earths-finite-resources.html "Why building new products for a circular economy is essential if we are to preserve the Earth’s finite resources") in our warehouse before delivering them to their site. It saves time and labour meaning their section of the [build](https://www.financedigest.com/building-economic-resilience-in-tough-times.html "Building Economic Resilience in Tough Times") is more likely to come in on time avoiding penalties. [**Mitigating Risk**](https://www.financedigest.com/mitigating-operational-risk-through-centralising-reconciliation.html "MITIGATING OPERATIONAL RISK THROUGH CENTRALISING RECONCILIATION") So, it seems clear to me that throughout a project the amount of risk increases as it is pushed down through the tiers of subcontractors with those at the bottom having everything to lose. However, by [working closely with a specialist supplier](https://www.financedigest.com/apple-works-with-chinese-suppliers-for-latest-iphones-nikkei.html "Apple works with Chinese suppliers for latest iPhones – Nikkei") who understands the challenges, those risks can be mitigated to a great extent. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---