Material Shortages Risk - Paper Sample

Published: 2024-01-11
Material Shortages Risk - Paper Sample
Type of paper:  Essay
Categories:  Risk Business Covid 19
Pages: 3
Wordcount: 630 words
6 min read


The residential construction industry is a sector that experiences exponential growth due to the demand for housing. The business focuses on building, selling individual and malt-family dwellings. However, the industry has encountered a supply chain risk setback due to the current COVID-19 pandemic, as the rate of businesses has dramatically declined. Companies in this industry can identify, analyze, assess, and control the potential risks in advance. Some firms have already closed doors due to the general issues associated with the hostile climate. Notably, there has been an increment in lead time on material orders, resulting in customer dissatisfaction. Effective risk mitigation strategy should involve all stakeholders in the supply chain. Notably, they should be able to take strategic steps to identify and mitigate material shortage issues.

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Construction Industry

The construction industry relies on different initiatives to ensure the smooth flow of goods. However, the COVID-19 pandemic has already made it difficult for some companies to continue operations due to material shortages. Management needs to strategize on effective risk mitigation measures to enable their companies to remain operational until the pandemic ends and business resumes normal operations. Work processes at construction sectors may be on, meaning that the needed materials are consistently on demand. Ultimately, there exists a gap between supply and demand. Such variance should be considered lost revenue due to the unavailability of materials to sell, as its demand is relatively high.

Material shortages are a tremendous setback in any industry, as production processes will immediately decline, resulting in underproduction and eventual increment in demand as supply decreases. In the construction industry, this risk factor can significantly decline the rate of material shortages. The relatively accepted risk assessment model and quantification are based on the occurrence rate (probability) multiplied by the event’s impact (Stergiopoulos et al., 2015). Such a formula can expose the risk magnitude. The magnitude of the risk is relatively high in terms of probability of occurrence and its associated impact on the residential construction industry.

Human Force Costs

The issue will thus result in cutting down on human force costs. The maintenance of fixed expenses means that such firms will experience a lower rate of profits and, in the worst scenarios, losses. The residential construction industry will continue to experience an increment in demand as is with population and immigration. Such variables mean that investors in this sector must consistently consider raising their output. Due to the COVID-19 pandemic, companies in the construction industry can use risk mitigation initiatives, particularly mitigation, to curb the demand-supply gap.

The construction industry can assess the impact of the identified risk and opt to limit their exposure. Such a strategy can result in curbing the rate of business losses and eventual closure. Moreover, it employs some aspects of risk avoidance and acceptance. Risk mitigation in this consideration is relatively the best measure to undertake, as it can ensure effective partnering between various players in the industry (Muneeswaran et al., 2018).


Notably, the decline in materials supply would result from understaffing due to the need to maintain recommended social distancing. However, investors can opt for appropriate risk mitigation initiatives like not scaling down operations and expanding the work area to accommodate more staff. Such a measure would be implemented as per the health guidelines and still maintain an incremental production capacity rate.


Muneeswaran, G., Manoharan, P., Awoyera, P. O., & Adesina, A. (2018). A statistical approach to assess the schedule delays and risks in Indian construction industry. International Journal of Construction Management, 20(5), 450-461.

Stergiopoulos, G., Kotzanikolaou, P., Theocharidou, M., & Gritzalis, D. (2015). Risk mitigation strategies for critical infrastructures based on graph centrality analysis. International Journal of Critical Infrastructure Protection, 10, 34-44.

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