Project owners, lenders, general contractors and other stakeholders share in the financial exposure that defaulting entities have on a project throughout the project ecosystem.
The larger the project, the more likely significant defaults will cause material financial losses and could even undermine a projects financial sustainability. so the risk of default by any of the project participants needs to be managed as efficiently and cost effectively as possible.
An historical weakness with surety bonds was the communication of the ongoing progress of the “risk” to the surety on the bond so they were aware of a potentially deteriorating situation that may result in default. Previously, getting the information to the surety has been limited by the constraints of a paper based system. The negative implications such communications have had on the general/subcontractor relationship often resulted in situations where the surety is the last to know a problem exists. By the time the surety is notified the situation has often deteriorated to the point where the time required for the surety to understand the obligation is longer than the general/owner has with the delays adversely impacting the project and compounding the dispute.
A common criticism of surety bonds is that they are merely a right to sue, or a source of recovery after years of litigation, not an effective partner at a critical time.
Surety Based Risk Management program uses evolving technology and data interoperability to improve the communication to the surety so that they can be an effective partner at that critical time because they were engaged instead of unaware.
