Did you know that 30% of contractors fail because of management issues? As a contractor, you’re likely aware of the multiple risks inherent in running a construction business. Construction projects require a great deal of time and resources.
Whether it’s maintaining employee safety on site or fulfilling the terms outlined in your contract with clients, construction hazards, if not managed properly, can compromise your builds, damage trust with your clients and ultimately hurt your bottom line.
In 2019, contractors will have to handle a new set of risks in their projects—from rising material costs and trade to increasing pressures for building green and prefabricated construction. New technologies, such as drones, are raising concerns over efficiency, while shifting policies of insurance companies could change how you assign risks.
To maintain productivity and profitability, it is important for construction businesses to have a management plan in place. An effective construction risk plan must have easy-to-follow, detailed processes to help you identify risks, control them, and then turn around to boost your business. The processes include:
- Identify the risks – Risks fall into many categories, but the most common are safety, financial, legal, project and environmental.
- Prioritize risks – Analyze all possible risks and rank them by impact and urgency.
- Determine your risk response strategy – Response techniques include avoiding, transferring, mitigating and accepting risks. The right strategy will depend on the risk.
- Execute a plan – Solutions should be outlined for the different levels of your company: strategic and enterprise level, structural level, and operational level.
- Involve the team – Update the owner, design team and contractor teams; monitor major files; and seek advice from your insurance program or risk management outsourcing partner.
For more information on each step, check out the infographic below from BigRentz for a guide to the construction risk management process.
Infographic provided by BigRentz
Risk management should be seen as one of the most critical steps of a construction project. Too often, construction owners focus on maximizing their return and not addressing the potential pitfalls. Construction risk management provides many benefits, including reduced liabilities, improved financial results, higher quality construction, more effective hiring, increased legal integration and overall better structure in your business.
Not all construction risks are negative in nature. Positive risks, such as accepting a complex project from a client, can serve as great opportunities for success. By implementing the right strategies and resources, your business will be able to flip the risk-reward tradeoff, increasing your profits and achieving business longevity.