Effective and early monitoring of development projects is essential for protecting banks’ interests and exposing potential project failure, says RICS in its Thought Leadership Paper ‘Project Monitoring in Property: a key risk-management tool for banks’, launched on 3 December 2012.
With the core framework of Basel III in place, the focus now is on the implementation of the anticipated changes to banking practices, which includes the likely introduction of additional capital charges for different risks. The influence of Basel III, which strengthens the quality and quantity of capital and risk coverage and introduces some new prudential requirements, is already being felt in the increased cost of capital to borrowers, with banks becoming increasingly selective in the projects they are willing to fund.
The paper highlights inadequate monitoring as a potential cause of project failure that can be avoided by a pro-active risk management strategy. The report’s authors, the Built Environment Working Group of RICS Europe, suggest that clear and concise communication of the risks of a development project and adequate project controls are fundamental to avoiding project failure and to protecting banks’ interests.
According to the report, early appointment of an RICS qualified Project Monitor can allow banks to manage risk in an objective manner by identifying and advising on potential risk, thus reducing banks’ exposure and increasing the likelihood of a successful completion of the development.
- More than ever, it is important to increase the resilience of the banking system in Europe. With this paper, we would like to emphasize how the future of project monitoring for property developments is crucial for providing banks increased risk transparency and exposing potential project failure. RICS members working in this field of expertise are pleased to offer their advice and establishing a proactive, targeted and continuous dialogue with the banking community to explain the complex nature of the development process and the many factors that influence successful delivery of a property development, including the benefits of employing Project-Monitoring surveyors. - said John Atkins MRICS, Chairman of the Built Environment Working Group, RICS Europe.
With the core framework of Basel III in place, the focus now is on the implementation of the anticipated changes to banking practices, which includes the likely introduction of additional capital charges for different risks. The influence of Basel III, which strengthens the quality and quantity of capital and risk coverage and introduces some new prudential requirements, is already being felt in the increased cost of capital to borrowers, with banks becoming increasingly selective in the projects they are willing to fund.
The paper highlights inadequate monitoring as a potential cause of project failure that can be avoided by a pro-active risk management strategy. The report’s authors, the Built Environment Working Group of RICS Europe, suggest that clear and concise communication of the risks of a development project and adequate project controls are fundamental to avoiding project failure and to protecting banks’ interests.
According to the report, early appointment of an RICS qualified Project Monitor can allow banks to manage risk in an objective manner by identifying and advising on potential risk, thus reducing banks’ exposure and increasing the likelihood of a successful completion of the development.
- More than ever, it is important to increase the resilience of the banking system in Europe. With this paper, we would like to emphasize how the future of project monitoring for property developments is crucial for providing banks increased risk transparency and exposing potential project failure. RICS members working in this field of expertise are pleased to offer their advice and establishing a proactive, targeted and continuous dialogue with the banking community to explain the complex nature of the development process and the many factors that influence successful delivery of a property development, including the benefits of employing Project-Monitoring surveyors. - said John Atkins MRICS, Chairman of the Built Environment Working Group, RICS Europe.
