Enterprise Risk Management


in the Engineering and Construction Industry



By Bob Prieto

Chairman & CEO
Strategic Program Management LLC

Florida, USA


The focus of this paper is to look at enterprise risks and their management in the engineering and construction (E&C) industry. The E&C industry has lagged many other sectors in the adoption of strong enterprise risk management systems and processes and many of those that have been put in place fail to recognize the features which make this industry unique. The industry’s approach to date has in many ways been superficial (especially true for many of the publicly traded firms) that seem to be going through the motions to satisfy public markets.

The uniqueness of the engineering and construction industry challenge arises from the project nature of the industry and the firms operating in it. It is fundamental to the Enterprise Risk Management challenge that the industry faces. This project nature is contrasted with the continuous operational nature of many of the early adopters of enterprise risk management with a standard suite of projects and services. Engineering and construction faces an ever changing suite of enterprise risks as the characteristics and circumstances change within its portfolio of projects.

What is Enterprise Risk Management (ERM)?

Enterprise risk management encompasses the processes, systems, strategies, and tactics to manage the totality of risks and opportunities that a business faces across the entirety of the organization and its portfolio. ERM is focused on assuring that the enterprise can achieve the strategic business outcomes[1] it has set for itself within its selected risk appetite.

This portfolio view is important in distinguishing ERM from risk management within key functional and organizational elements. In essence it subsumes all lower tier risk management strategies into a broader, all-encompassing one at the highest enterprise level. Management, often including the board of directors, utilize the ERM process for “identifying, analyzing, responding to, and monitoring risks and opportunities, within the internal and external environment facing the enterprise”[2].

Top level enterprise risk strategies are developed within the bounds of the risk appetite that has been established for the organization and often consider several potential scenarios as part of the development of enterprise risk management and mitigation strategies.

Why is ERM important?

ERM’s primary focus is to support the organization in its achievement of the strategic business outcomes it has established. Increasingly, enterprise risk management has become a focus area for investors and financial regulators, with the risk scope of interest expanding. This financial and regulatory focus is not limited to publicly traded corporations with larger private companies increasingly being required to meet comparable standards and disclosure requirements.

The importance of ERM to the E&C industry is exemplified by recent losses suffered by major contractors and their subsequent withdrawal from “risk work”. Many have suffered project losses that have put their entire enterprise at risk.


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How to cite this paper: Prieto, R. (2022). Enterprise Risk Management in the Engineering and Construction Industry, PM World Journal, Vol. XI, Issue V, May. Available online at https://pmworldlibrary.net/wp-content/uploads/2022/05/pmwj117-May2022-Prieto-Enterprise-Risk-Management-in-Engineering-and-Construction-Industry.pdf

About the Author

Bob Prieto

Chairman & CEO
Strategic Program Management LLC
Jupiter, Florida, USA


Bob Prieto is a senior executive effective in shaping and executing business strategy and a recognized leader within the infrastructure, engineering, and construction industries. Currently Bob heads his own management consulting practice, Strategic Program Management LLC. He previously served as a senior vice president of Fluor, one of the largest engineering and construction companies in the world. He focuses on the development and delivery of large, complex projects worldwide and consults with owners across all market sectors in the development of programmatic delivery strategies. He is author of nine books including “Strategic Program Management”, “The Giga Factor: Program Management in the Engineering and Construction Industry”, “Application of Life Cycle Analysis in the Capital Assets Industry”, “Capital Efficiency: Pull All the Levers” and, most recently, “Theory of Management of Large Complex Projects” published by the Construction Management Association of America (CMAA) as well as over 800 other papers and presentations.

Bob is an Independent Member of the Shareholder Committee of Mott MacDonald and a member of the board of Dar al Riyadh. He is a member of the ASCE Industry Leaders Council, National Academy of Construction, a Fellow of the Construction Management Association of America, and member of several university departmental and campus advisory boards. Bob served until 2006 as a U.S. presidential appointee to the Asia Pacific Economic Cooperation (APEC) Business Advisory Council (ABAC), working with U.S. and Asia-Pacific business leaders to shape the framework for trade and economic growth. He is a member of the Millennium Challenge Corporation advisory board where he had previously served. He had previously served as both as Chairman of the Engineering and Construction Governors of the World Economic Forum and co-chair of the infrastructure task force formed after September 11th by the New York City Chamber of Commerce. Previously, he served as Chairman at Parsons Brinckerhoff (PB) and a non-executive director of Cardno (ASX).

Bob serves as an honorary global advisor for the PM World Journal and Library and can be contacted at rpstrategic@comcast.net

To view other works by Bob Prieto, visit his author showcase page in the PM World Library at https://pmworldlibrary.net/authors/bob-prieto/

[2] Wikipedia, Enterprise Risk Management