What is Construction Risk Management?
Risk management in construction is the process of assessing, preparing for, and mitigating risks to keep workers and communities safe and projects on track.
While no project is ever risk-free, following a formal construction risk assessment and management process can help you prevent the negative outcomes that knock projects off-track and impact your bottom line.
Risk management in construction can refer to many areas of risk, including:
- Safety risk
- Project management risk
- Financial risk
- Environmental risk
- Legal risk
Let’s dive into these different risk areas and explore different risk management practices for construction projects.
Construction Safety Risk Management
Despite major improvements in safety, construction remains a dangerous industry.
According to the US Bureau of Labor Statistics, there were 1,008 fatal construction-related injuries in 2020, caused by factors like fires, falls, exposure to harmful substances, and transportation incidents.
The baseline for construction site safety risk management is following all OSHA guidelines and regulations, including:
- Ensuring all workers are wearing proper personal protective equipment (PPE)
- Properly training workers on the use of equipment and health and safety procedures
- Mitigating site risks with proper labeling, safe scaffolding, ground fault protection, etc.
Mitigating Construction Project Management Risks
In the construction industry, risk doesn’t only refer to safety. Anything that can prevent a project from being completed to spec, on time, and on budget is a risk. Poor planning and budgeting, resource management issues, and time management issues are just some of the risks that can impact project outcomes.
By following construction project management best practices, you can mitigate these risks and increase your chances of completing the project successfully.
One best practice is to digitize your project management workflows using cloud-based software. By moving away from manual processes and cumbersome spreadsheets, project managers can save time, reduce their workload, and identify risks before they get out of hand.
Managing Financial Risks in Construction
Now more than ever, many stakeholders are focused on the financial risks impacting construction projects. Macroeconomic issues like inflation and supply shortages have an outsized impact on the construction industry, where any delays are likely to compound and lead to cost overruns.
While project managers have little control over the economy, there are ways to manage financial risk and create more wiggle room when it comes to dealing with these uncertainties.
One construction cost that’s often higher than necessary is rework. The best way to mitigate the financial risk of rework is with construction progress photography.
By taking photographs of every part of the build at every stage of construction, you can avoid tearing up slabs or tearing down walls when issues arise. Swinerton Builders, a Multivista client, estimated that having access to project photography saved them about $40,000 in rework costs on a recent build.
Managing Environmental Risks in Construction
Environmental risk in construction actually involves two unique risk areas: Risks that the project poses to the environment, and risks that the environment poses to the project.
There’s nothing project managers can do to stop the weather — however, there are steps they can take to mitigate the damage caused by flooding, wind, moisture, and other environmental factors.
Keeping consistent and comprehensive documentation is one best practice in this area. With visual documentation, it’s easier and faster to assess damage and file insurance claims following a natural disaster.
Project managers are also responsible for mitigating the damage their equipment and materials may cause to the environment. This includes proper management of waste, air quality procedures, and even noise reduction.
Managing Legal Risks in Construction
There are many parties involved in any construction project, from the clients and general contractor to the subcontractors and tradespeople employed throughout the build. The sheer amount of intersecting interests makes construction a very legally risky field.
Contract disputes are a major source of legal risk in construction. To manage this risk, its important to use specific, attorney-approved contract language, retain access to legal counsel, and maintain comprehensive documentation of all the work being done on site.
Each risk management area comes with its own specific rules, regulations, and best practices.
However, one common theme in construction risk management is that digital technologies are making it easier. Multivista provides construction documentation services which can be very useful for managing risks and building better.