Construction risk management is a vital element in the construction industry, since all construction projects involve some risk. It calls for skill, careful planning, and quick decision-making.
When not mitigated, risks can derail the successful completion of a project. Nevertheless, effective handling of risks can benefit your business since you’ll attract clients with your ability to identify and manage risks.
To manage construction risk effectively, you need to know the types of risks involved in construction projects. There are many risks associated with construction, including workers who fall from scaffolding, people working at heights, and of course, the dangers of defective equipment.
Know the Risks
Here are some common construction risk factors you should be aware of in construction projects. There are also tips on managing them properly and preventing them from ruining your project.
Health & Safety Hazards
Employee safety throughout the workplace should be a priority. The state of the site can change rapidly, and unexpected project risks can occur at any time. A serious accident can result in severe injury or death to an employee. Your goal in every project is to be safe and ensure that all workers go home safely.
In addition to harming employees, serious accidents can disrupt or postpone work due to low employee morale, reducing productivity. This can put projects and businesses at significant financial risk due to the costs associated with risk management.
Investing in training, technical management, and protective equipment (PPE) to avoid risk is much cheaper than the costs you would face if the consequences occur. Ensure that all your subcontractors understand your safety obligations and train their staff before you start work.
Hold a security briefing with employees and subcontractors before starting the project. The briefing should cover the risks and dangers that can occur throughout the construction stage. Make sure everyone reviews and understands the safety plan that created the project.
The topics of the first safety meeting should include safe work practices for various activities and activities, selection and correct use of PPE and basic first aid. Discuss technical safety measures that apply in the workplace.
Conduct daily or weekly toolbox talks to enhance your work security efforts. It alerts employees to changes in the workplace and working conditions, focusing on high-risk situations. These can be categorized commercially to integrate day-to-day operations, emphasizing potential risks and performing each task safely.
As a contractor, it’s good business practice to research your potential client before pricing the project. This background check will tell you whether or not the client has a bad payment record with their previous contractors or a history of disputing invoices and variation claims.
Always ensure that your client gets timely updates on the expected total cost of the project. The update includes notifying them of variation claims that might crop up during the execution of the project. Keep your ears open for rumors or testimony that might imply the client is facing financial troubles.
Submit invoices in a well-timed manner, making sure that they are in the correct format and feature all of the required supporting documentation. Don’t give customers any reason to keep away from paying invoices.
Increased project costs, delays in setting contract marks, outages, and projects not completed on time are problems caused by poorly managed change orders. Managing change requests requires preparation, understanding, and extensive communication with all parties involved in the project.
This clause may mean that you cannot initiate exchange work without a written and approved exchange order. Remember to use a language that allows the owner to request additional work without an existing agreement. The change order may not affect costs or project planning, but it is not always the case.
Make sure you include all work requirements, materials, and equipment in the replacement schedule. Think about how each change request affects the subcontractors of your project. Work with your subcontractors to assess the cost and schedule changes, and how change plans affect contract work.
Labor Shortages & Productivity Issues
Not having enough staff to complete a project or reach production goals is a significant risk when taking on new projects. Without the skilled staff on the job, the project could suffer due to extended construction schedules and possible delays in delivering the project on time to the owner.
The construction industry lost more than a million jobs from February to March 2020 due to the COVID-19 epidemic but has gained 857,000 since December 2020. These employees will not have the same skills as experienced staff, which means they will be less productive and will need to be closely monitored when they start.
Safety is also a crucial aspect of a construction project that you must consider when working with new employees. To retain staff, provide training opportunities, counseling, and continuing education courses available to your new and existing employees.
In the construction industry, coordination often refers to design planning. It’s the integration of projects designed for different project team members to form a single, integrated set of information that can be constructed without conflict between components.
Communication is a major problem in the construction industry, where groups of people may come together to form a complex design and construction that includes many related elements, and when the work is finished, they may disintegrate and may no longer work together.
Each construction project requires the participation of internal staff, site staff, contractors, subcontractors, and suppliers. These sections often have different processes and programs that work alone. Without proper intervention and deliberate design, monsters build and focus on how businesses operate.
Integration is often seen as improving efficiency and effectiveness. Effective design integration can help reduce costs, delays, and disruptions that can result from site problems and the need for repair or abortion and redesign operations.
Document control is one of the biggest threats to the construction industry. Managing documents properly is one of the project manager’s tasks that is tedious and time-consuming. Construction projects require large, perhaps thousands, of documents that can take a lot of effort to repair and file.
Documentation is always vital for managing risk in construction projects, large and small, in the best of times. It’s crucial in the worst of times when forces outside your control impact projects. With project delays, material shortages, increased costs, and other issues fueled by the pandemic, proper documentation is critical for accessing detailed reports on the impact of the virus on projects.
Without clear documentation, communication erodes, and the risk rises. There could be hundreds of change orders for each construction project. Each change could add hundreds of pages to a contract. By properly creating and managing project documents, you’ll minimize the miscommunication and arguments that halt work and cause project delays.
Nowadays, contractors are switching from paper to digital. Additionally, these software tools use cloud-based technology that allows you to search for any document at any time. They also minimize schedule delays and access to central document locations.
Clear communication with stakeholders is essential from start to finish. The project would not be profitable without it.
So beware of a project owner who wants you to bid for a job with incomplete drawings and without a clear project scope. Bidding without all the information you need will ensure that design errors will follow. The project scope increases, headaches are sure to follow.
To avoid this nightmare, ask for all the information you need in advance. Then you can determine the building methods and materials you will need for the job before submitting a bid. And once you have completed a project, make sure you keep in touch clearly and get the most important things in writing.
Schedule risk occurs when the construction schedule is not realistic, neglecting to consider issues such as client performance, project limits, and expected local climate — risks of planning costs and poor performance. Poor communication with planning-related errors can set a schedule back in days, weeks, or months, having a significant impact on the construction project budget.
Stop the Cycle: Why Construction Risk Management is Crucial
Construction is an industry prone to risks. Each project is unique and individual, with its own challenges and outcomes. Accidents can occur in any form and at any stage of the construction process.
Lack of risk reduction can lead to less profitability, efficiency, and unmanageable project schedules. One of the most subtle components of the construction process is to identify and manage construction risks. This is possible with complete planning and risk reduction.
Risk management is essential for every construction company. Having unknown risks can put your business at risk and leave you unprepared for the future. The construction risk management process enables project managers to predict the source of the risk and identify projects at risk of cost overruns.
Ignoring or underestimating some construction risks can cause significant delays, costing your business. In fact, due to poor construction risk management, 63.6% of contractors closed shop before their fifth year.
Unmanaged risks can have a severe impact on the costs, schedules, and performance of your project. This will lead to delays and disputes in the future. With the proliferation of software and project management tools, risk reduction is easier than ever.
It is vital to understand the most common construction risks. Take time to investigate, as well as steps to reduce or eliminate risks. Remember, even reducing the number of impacts, can help you safely negotiate more projects.
Sometimes it is wise to walk away from a bad deal. A smart contractor will leave a risky project, where the client may not have the money to pay, or where the client has a history of mistreating his contractors. Do not think that a bad client will treat you better than his other contractors.You can contact us to learn more.