The Banking Executive Magazine - September 2025 Issue

From Risk to Resilience PILLAR TWO: COST & SCHEDULE VALIDATION – GUARDING AGAINST OVERRUNS One of the oldest lessons in construction finance is that budgets lie—sometimes unintentionally, sometimes by design. Contractors may front-load bills of quantities to secure early cash flow, or underesti- mate costs to win bids. Without in- dependent validation, banks are effectively gambling on numbers that may not hold. This is why schedule and cost vali- dation should be non-negotiable. Leading lenders now engage cost consultants to verify contractor esti- mates. The true power emerges when these validations are logged and compared in PMIS. Instead of anecdotal reassurance, the bank sees contractor and consultant data side by side, highlighting discrepancies in real time. The same principle applies to sched- ules. Delays are not only common— they are expected. With PMIS, every schedule update, every extension-of- time request, every variance from the baseline is captured in a traceable record. Banks no longer wait for bad news; they see slippages as they de- velop and can act before repayment is endangered. Here, digital oversight shifts the bank’s role. Rather than reacting when projects spiral out of control, lenders become proactive guardians of financial discipline. PILLAR THREE: CASH FLOW & COMMITMENTS – PROTECTING THE LIFELINE Cash flow is the heartbeat of any project. When it falters, work stops, claims rise, and loans sour. For banks, ensuring that project cash flow aligns with financing arrange- ments is one of the most critical as- pects of credit risk management. Traditionally, banks relied on static reports to monitor progress pay- ments. But static reports often con- ceal problems until it is too late. By contrast, PMIS links the cost-loaded project schedule directly to cash flow planning. It integrates planned dis- bursements, contractor invoices, and actual progress, producing a real- time picture of liquidity. Imagine a project where a contractor repeatedly submits inflated invoices against minimal progress. In a paper- based world, detection might take months. With PMIS, every invoice is cross-checked against physical progress and approved workflows. The discrepancy becomes visible in- stantly, allowing the bank to inter- vene before funds are misused. “Cash flow is where projects live or die. Digital oversight ensures that banks know exactly how money is flowing, and whether it matches re- ality.” This visibility extends to procure- ment and commitments. Every sub- contract, every purchase order, every approved change order is logged, preventing hidden liabilities from eroding financial stability. For lenders, this means confidence that the financing plan is grounded not in assumptions, but in verified transac- tions. the BANKING EXECUTIVE 34 ISSUE 201 SEPTEMBER 2025