Construction is an inherently risky business. Every project has its own set of uncertainties and challenges. Without proper management, these risks can derail the project and severely harm the business. That’s why risk management in construction is vital. An effective risk management plan should allow you to mitigate the risks and turn them around to advance your company instead. With newer industry trends and more complicated projects, learning to manage the dangers becomes even more crucial than ever.
Risk refers to any potential event that, if it occurs, can result in the construction project failing one or more of its objectives. Risk isn’t always harmful, though. With thorough planning and implementation, it can translate to better relationships with stakeholders and increased profits. To help you manage the risks in construction, you need to know what they are:
Safety Risks. These are hazards that can result in worker accidents. These include the risks associated with material handling, working at height, slips, and trips, to name a few.
Project Risks. These are threats arising from poor project management, inadequate or ineffective company policies, miscalculation of time and resources, and more.
Environmental Risks. These are natural phenomena like floods and earthquakes that can damage job sites and make work inaccessible.
Client Risk. These are risks arising from many factors. These include communication problems, insufficient funds, design issues, and misunderstanding of project deliverables.
Financial Risks. These refer to factors that affect financial flow. These include problems with the economy, an unexpected increase in building supply costs, and competition with other construction companies.
Legal Risks. These are potential disputes that may arise in fulfilling the contract terms with the clients.
The methods involved in risk management generally have three major stages:
Risk Identification. It would be difficult to deal with a particular risk if you don’t recognize them. Not all risks are wholly or immediately recognizable, especially at the start of the construction phase. That’s why this step should be taken in a forward-looking manner and according to the project’s progress.
Risk Assessment. This consists of qualitative estimation as well as quantitative analysis of every risk and its effects. There are numerous methods used to assess and compare risks. These are key performance indicators, qualitative assessment, and risk profile. By evaluating the risks, you will know which risks should be prioritized. Your decision should be guided by the risks’ likely impact on your company. The probability of that risk actually materializing should also be taken into account.
Risk Response. Once you have assessed the risks at hand, you would have to decide on the response strategy. Risks in construction are complex, but the techniques generally fall into four main categories. These are avoiding the risk, transferring it, mitigating it, or accepting the risk.
Are you searching for better ways to streamline your operations and increase profits? At Core Consulting Group Inc., our team of experts can help you create the risk management plan that befits your project. Call any of our offices today in California, Arizona, and Florida, to schedule an appointment.