The construction companies with business probityrisk often lead to poor publicity. In general, senior management is not awareof the omission and errors in the internal control system and risk managementpolicies, resulting in poor business performance. If company cannot solve theissue proper, the company’s stakeholders will lose confidence in the company,resulting in the company’s share price down. Moreover, the company will berequired to change its management team or reorganize its structure through theboard of directors. Reorganizing the organization, implementing new internalcontrols and hiring new management teams are costly and waste a lot ofresources and new management teams take time to adapt to corporate culture andthe environment. More seriously, companies may lose the opportunity to bid onconstruction projects with other competitors, as bidding for constructionprojects requires substantial cash and resources.
Even if the bid wassuccessful, the company was unable to hand over the building and infrastructureto the public after the construction project was completed because people didnot believe companies with management problems.Compliance with regulations is a must for allconstruction companies because the construction process is complex anddangerous. If does not aware of it, the quality and safety of socialconstruction may be affected.
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That why the regulator bodies like CIDB establishseveral of rules and regulation for monitoring and guiding the constructioncompany. Every step of the construction process has its own requirements mustbe completed, otherwise the construction process cannot continue or forced tostop. In general, these companies do not comply with the requirement and mayresult in penalties. For An example, registration of contractors is compulsory,meaning that they must register with CIDB and hold a valid registrationcertificate issued by the Board.
If fail to comply with it, the errantcontractor faces a fine of RM10, 000 up to RM100, 000 underSection 25 of the CIDB Act 520. If the situation is serious, the company’slicense will be permanently revoked by CIDB which mean that the company have toclose down and cannot perform as contractor anyone. Companies that are at riskof compliance have always had difficulty getting government or private sectorconstruction projects. Not only that, the company may be prosecuted because ofnon-compliance with laws and regulations and bear huge legal costs. Even winthe lawsuit, the company’s reputation is irreparable.Health, safety and environmental risks are issues ofconcern to construction companies and always negatively impact the company.
When an accident occurs at the construction site, the construction company haveto bear the responsible for not having proper health and safety policies in thecompany. Not only that, companies may be forced to stop construction projectsfor regulatory agencies to investigate. Once regulators find that securitymeasures do not meet the standard requirements, the company may be prosecutedor fined.
And also, company have to pay compensation to the workers who getinjuries from the accident. This incident may cost the company a lot andcompany’s license may be revoked by regulator. Moreover, after the completionof construction works, the company has the responsibility to consider a safeenvironment and a good landscape environment, otherwise the company will bepublic complaints and fined by the regulatory body.