The Banking Executive Magazine - September 2025 Issue

From Risk to Resilience INTRODUCTION: THE STAKES COULDN’T BE HIGHER When a billion-dollar construction project falters, the impact ripples far beyond unfinished buildings or de- layed roads. For banks, it can mean distressed loans, strained relation- ships, and even regulatory scrutiny. Construction finance carries unique risks—projects are long, complex, and vulnerable to delays, overruns, and disputes. For lenders, this makes credit risk management not just a protective measure, but a survival strategy. Studies show that more than 70% of major capital projects suffer from cost overruns or schedule delays. That statistic should alarm every banker and regulator. It means the probability of a financed project run- ning into trouble is not a remote pos- sibility—it’s the baseline. The challenge is clear: how can banks maintain confidence that the projects they finance will be completed on time, within budget, and with repay- ment secured? This is where strategic oversight, sup- ported by digital tools such as Project Management Information Systems (PMIS), is changing the landscape. While PMIS is not the story itself, it increasingly underpins the story of resilience: banks equipped with real- time visibility, structured gover- nance, and early warning systems are better positioned to safeguard their capital and strengthen client trust. PILLAR ONE: RISK ASSESSMENT – SEEING TROUBLE BEFORE IT STARTS Every failed loan begins with risks that were either overlooked or un- derestimated. In construction fi- nance, risks come from everywhere—design flaws, weak contractors, regulatory hurdles, or volatile markets. For banks, identify- the BANKING EXECUTIVE 32 ISSUE 201 SEPTEMBER 2025 FROM RISK TO RESILIENCE: HOW BANKS CAN REINVENT CREDIT RISK MANAGEMENT IN CONSTRUCTION FINANCE