A recent survey by FMJ and FM company Salisbury Group found that the vast majority of FMs see risk management as a key part of their role. We brought together a group of client-side FMs under Chatham House rules to discuss risk and risk transfer within the sector
• Sara Bean (Chair), Managing Editor – FMJ
• Nick Platt, Managing Director Sales and Marketing – Salisbury Group
• Andrew Lunt, Group Managing Director – Salisbury Group
• Steve Harris, Head of Facilities Management – London Borough of Camden
• Mark Ellis, Head of Facilities Management – Greater Anglia
• Stephen Morris, Global Head of FM – RICS
• Alan Russell, Head of Engineering and Facilities Management – Heathrow
• Karen King, Facilities Contract Manager – Anglian Water
• Daren Larmour, Head of Facilities Management – ADIA
• Peter Clinker, Head of Property and Facilities Management – Nestlé
• Katie Miles, Facilities Director – Penguin Random House/Boulevardiere
• Maureen Symester, Head of Facilities – Richmond Pharmacology
• Keith Dibble, Head of Real Estate, West Europe and Mediterranean – Ericsson
• Paul Wilson, Central Portfolio Facilities Director – Knight Frank
• Joanna Lloyd-Davies, Managing Director – JLD Consultants
• Thomas Bateman, Associate Director – Gleeds
Risk is routinely the focal point for the FM industry, according to a recent FMJ/Salisbury Group survey, which shows it permeates all levels of the sector – from procurement risk to maintaining compliance. Handled wrong, it can lead to disaster; handled right, it forms the basis of sustainable and successful partnerships. FMJ and Salisbury Group brought together a panel of senior FMs to discuss how the sector can reduce the level of risk in running FM services – particularly when managing outsourced contracts.
Q: When an organisation is considering outsourcing some or all of its FM services, should it be primarily to reduce risk, or for a variety of sound business reasons?
Nick Platt noted that if risk is transparent, it’s important to understand what you’re contracting for, which can prove difficult within organisations that don’t have an asset register or condition surveys. “We see a lot of procurement, where irrespective of what the FM is doing, procurement and legal want to put everything onto the incoming contractor, and that’s not particularly good practice,” he said. “The first thing we would look for is for both parties to fully understand the risk, or admit they don’t really know where they are and carry out some investigative work. That helps to embed a culture of transparency and collaboration from day one.”
The panel suggested that in terms of risk transfer, FMs are not really transferring the risk but asking suppliers to manage the risk on the client’s behalf. As one FM remarked: “From a client perspective if my services aren’t working my client will come to me, not the outsourced contractor. This is why as a client it’s about resilience and encouraging a process of full transparency, while continuing to assess the risks and invest in the infrastructure that supports my business.”
Transparency across all the parties involved in an FM contract is a crucial element. You receive the best service from suppliers when you have trust in them; particularly when they deliver technical services that you can believe and trust in without having to go to third-party consultants. What is very encouraging is that transparency is being enhanced within the market as a result of better access to data – and more knowledge equals better leverage.
However, a trusting partnership is much bigger than data, said Joanna Lloyd-Davies. “It’s about the organisation and how relationships work at every level. It comes down to trust and collaboration, working out which of your contenders suit you the best. Fit is a very small word but it’s important; the risk is all about the data you’ve got and investment in people, money, time and so on. It’s also about making sure that people on the front line are actually understanding the message, as if they don’t, you won’t get anything done.”
Q: What are the business conversations around essentially insourcing that risk by bringing services back in-house?
It was agreed that it takes a lot of work to bring FM back in-house, because the trend in recent years has been to outsource everything, from the people to the technology. If you want to bring it back in you’ve got to bring all those elements back to the table. It’s also important to acknowledge that if you’re going to take this route you’ve got to take the risks on board as well. And for many organisations some elements will stay in-house while others (particularly specialist services) will go to a supplier, or, as one FM succinctly commented, “you don’t have to dump it all out or take it all back in-house.”
Andrew Lunt argued that some of the well-publicised exits from suppliers in the marketplace are a response to historical risk transfer situations where they haven’t performed as they’ve taken on too much risk and not understood it themselves. “That comes back to the collaborative procurement process where everybody is openly sharing data and having a strong view on the risks, so that they can be allocated properly and then decent procurement decisions can be made.”
He recalled reviewing FM supplier options for a major national property portfolio when he was head of FM. “It was the reputational risk that we were concerned about, which is why we insourced and launched Salisbury Group. We had to insource the CAFM system and all of the people, starting with a management contracting approach and then slowly insourcing the capabilities, beginning with security, engineering and then cleaning. It’s been a valuable process because we’ve got the shared values with the property objectives and truly understand their business.”