Risk Management in Construction Projects: 5 Key Areas of Risk

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Construction comes with inherent risks, from safety concerns to timeline challenges and beyond. Without proper risk assessment and management, construction projects can quickly go awry, impacting your bottom line.

Construction risk management is the process of assessing, preparing for, and mitigating risks to keep construction projects on track. Before you come up with risk mitigation strategies, however, you need to understand the various sources of risk that can impact your project. Let’s explore five of the most common areas of risk and how to manage them.

1. Safety risks

Construction is a notoriously dangerous industry. According to the US Bureau of Labor Statistics, there were 1,102 fatal injuries in the US construction industry in 2019, representing 20.7% of total workplace fatalities for that year.

The primary method of maximizing safety is fairly obvious: following OSHA guidelines. Here are just a few examples:

  • Workers need to be equipped with proper PPE (helmets, eye protection, hearing protection, harnesses, N95 masks, etc.) depending on the type of work they’re doing.
  • Workers also need to be trained on how to properly use equipment and follow applicable health and safety procedures.
  • The construction site itself needs to be made as safe as possible via OSHA-compliant scaffolding, labeling, ground fault protection, etc.

That said, there’s a big difference between intending to follow safety guidelines and actually doing so. Routinely gathering photo documentation of your construction site can help you identify and address safety risks before they impact your project.

2. Project management risks

Construction projects are incredibly complex and require careful planning, close monitoring, and effective leadership. 

Issues like poor budgeting, poor resource or time management, failing to create or enforce the proper procedures, and project misalignment can have a huge impact on the outcome and profitability of the project. Without the proper project management skills and processes, everything can very quickly go off the rails. 

Digitizing your project management can help you optimize your processes by reducing the burden of administrative work, streamlining communication, expediting observation and inspection processes, and more. 

3. Financial risks

Due to the number of variables at play in construction projects, profitability always hangs in the balance. It’s vital to assess and plan for any financial obstacles.

Economic factors like inflation, the labor market, and materials costs are always in flux. While you can’t predict these factors with total certainty, you can take advantage of forecasting to explore the most likely outcomes and mitigate risk with careful budgeting and project management.

One obvious way to reduce financial risk is to avoid launching projects before they’re sufficiently funded. You can also limit change order and rework costs via progress monitoring.

4. Environmental risks

In the construction industry, environmental risk can refer to two different things: the risks the environment poses to the project, and the potential impacts of the project on the environment.  Both are important considerations.

Inclement weather and geological events (e.g. flooding, hurricanes, tornados, earthquakes, landslides) usually can’t be prevented, but you still need to be prepared for them. Of course, these risks will vary depending on the project location — building on a hillside in Los Angeles will come with a far higher risk of earthquake or landslide damage than tornado damage. 

The hope is that these events won’t occur at all, but keeping consistent visual documentation can help you assess damage and file insurance claims if necessary.

It’s also vital to assess and mitigate the potential environmental impacts of a project — like air and water pollution, noise pollution, utilization of natural resources, disposal of hazardous materials, and more — in order to keep it running smoothly and avoid legal consequences. Managing these risks largely comes down to sufficient due diligence and project management.

5. Legal risks

Construction projects come with the potential for legal disputes with workers or clients, as well as legal penalties for violations of laws or codes. Contract disputes, safety violations, and environmental violations are just a few examples of legal risks. 

Legal risk management practices for a construction project may include:

  • Using very specific, accurate language in contracts
  • Keeping organized records and implementing a document retention policy
  • Maintaining photo documentation of your construction site(s) to ensure you have evidence of compliance
  • Consulting with attorneys who specialize in construction law if any legal questions arise



Whether it’s related to safety, project management, profitability, environmental impact, or legality, risk is everywhere in the construction industry. Any deviation from the plan can have a negative impact on the project — and your bottom line — so risk management is vital.

Solutions like photo documentation can streamline the risk management process in construction projects by helping you reduce administrative work, maintain proper records, limit unnecessary costs, and more.

Explore our construction documentation services.

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