Risk Management In Construction: 6 Things to Know

Are you looking for a way to improve operational consistency and efficiency in your construction company? With a solid risk management plan, you could achieve this quickly and that isn’t the only benefit of a good strategy. You could save resources such as time and money, and improve safety as well. With the newly acquired confidence in your projects, you’ll be able to make more money and make the whole process flawless. However, creating an effective risk management plan isn’t easy due to numerous factors. Here are the elements of a well-made plan. 

Identification 

Identifying the possible risks is the perfect way to start. There are three types of risk you need to think about. Financial risks refer to incorrect estimation, problems with payment, or fluctuating material costs. 

When it comes to environmental risks, you should pay attention to weather conditions (especially the severe ones). Earthquakes, for instance, may bring a lot of damage to your business and your employees. Finally, technical risks refer to unavailable materials, errors in design, poor site investigation.

Assessment 

Recognizing everything that could go wrong might help you prevent many of the potential issues. That is why recognizing hazards is essential. If they do occur, you’ll know how to react if you were aware of them the whole time.

Then, you should evaluate the risk – how severe it is and how likely it is to happen. This will help you prioritize them and assess the ones with high impact and high probability first. 

Ownership

There should be a risk owner that will ensure that the risk is managed as it should be. This could be one person or a team. Controlling risks is both the contractor’s and project owner’s responsibility. 

A risk owner is there to make sure that the risk plan is created in the first place, and then, that it is maintained. Consulting with experienced construction lawyers can further improve this step and make the whole plan bulletproof!

Response planning 

Unfortunately, no matter how well-prepared you are, risk can still occur. If that happens, your reaction to the risk is the only thing that can make matters better. However, risk avoidance is always the thing to try to do. Some risks can simply be avoided and you should do that whenever you can.

If there must be a risk, the worst thing you can do is let it affect your business and your employees. Risk transfer, mitigation, and risk acceptance are all the things you could do in such instances. 

Monitoring 

Once you know what your risk management will be, you shouldn’t just stop thinking about it. New risks arise all the time and that is exactly why you should monitor your plan and the industry, as well as the specific projects.

By reassessing the project risks and analyzing the trends, you could stay up to date with the changes and you could update your management effectively. You can also schedule buffers when necessary. Reserving your budget can sometimes be the only way to go.

Cost analysis 

Finally, cost analysis is another important part of risk management. When you add a contingency to the total project cost, you don’t have to worry about spending more than you could afford to spend. 

You could use deterministic and probabilistic methods to calculate the contingency. This will help you always stay within the budget, even if something unexpected happens. 

Conclusion 

The risk management plan is all you need to save the resources in your company. Not only will you save money and time with a good plan you’ll also reduce the risk of injuries, and protect your business and reputation.