Risk Management

Jump to section

• Overview & contents
• i. Important Notice
• 1. Executive Summary
• 2. The CIDB Grading Ladder
• 3. The Market in 2026
• 4. Strategy: Private Work First
• 5. SWOT and Competitive Position
• 6. The Working Capital Problem
• 7. Retention and Guarantees
• 8. Unit Economics of a Contract
• 9. The Five-Year Roadmap and Gates
• 10. Funding
• 11. Estimating and Contract Control
• 12. People and Plant
• 13. Compliance and Registrations
• 14. Financial Projections
• 15. Break-Even
• 16. Sensitivity and Scenarios
• 17. Risk Management
• 18. Implementation Timeline
• 19. Returns
• 20. Key Performance Indicators
• 21. Key Assumptions
• 22. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

17.1 The risks that matter

Estimating error is the risk that ends contractors. One percentage point of gross margin is R520 000 at Year 5 turnover, and three points across the book is R1.56 million against EBITDA of R3.52 million. It is managed by a priced bill of quantities on every bid, labour constants measured from the company’s own completed contracts, refreshed material quotations, and a monthly cost report per contract that surfaces a problem in month three rather than at final account.

Payment delay is the risk that operates continuously and is largely outside the contractor’s control. Public bodies are required to pay within 30 days and 60 per cent of payments are delayed beyond it; practice has extended to 75 days. It is managed by complete claim documentation, monthly certification, disciplined chasing from day one, pricing the delay into the preliminaries, and capping the public order book against facility capacity.

Working capital exhaustion is what payment delay produces. Net working capital reaches R9.62 million at Year 5 and the facility advances against certified certificates only — not against retention or work in progress. It is managed by the growth equity subscription at Year 3, by the facility sized to the debtor book, and by the rule that the public order book must be fundable through a 90-day delay.

Losing grading credit is the risk that is entirely avoidable and most often realised. A project not registered on the Register of Projects earns no works capability credit whatever its value or quality, and the client — not the contractor — is responsible for registering it within 21 days of award. It is managed by written confirmation of registration at every award, chased if it has not happened.

Registration lapse became materially more dangerous on 1 January 2026, when auto-suspension took effect: a lapsed registration removes the company from the Register the day after expiry with no grace period and no notification. It is managed by a diarised renewal calendar owned by a named person.

17.2 Risks sized against the plan

17.3 Controls

• No bid is submitted without a priced bill of quantities, refreshed material quotations and written, scoped subcontractor quotations.
• The financing cost of the expected payment period is calculated at bid stage and priced into the preliminaries.
• A cost report per contract is produced monthly, with the forecast final account updated every month rather than at completion.
• Register of Projects registration is confirmed in writing at every award and chased if it has not occurred within 21 days.
• The retention register records every contract, its practical completion date, its defects liability expiry and the amount due at each release.
• The public order book is capped at what the facility and cash reserve can fund through a 90-day delay.
• No distribution is made to shareholders while available capital supports the grade the company intends to hold.