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Why It’s Important to Manage Construction Risk

When it comes to construction risk management, “winging it” is obviously not an option.

Consider the kinds of things you may have already encountered that carried some degree of risk or negative impact: Inclement or dangerous weather. Construction site hazards. On-the-job injuries. Sudden changes in materials costs or availability. Site theft. Frequent or extensive change orders. Labor shortages or disputes. What else could you add to the list?

Then think of all their possible repercussions — blown budgets, schedule overruns, a bad reputation, and let’s not forget put-you-out-of-business lawsuits. Which is why construction risk management is so critical — not just when something happens, but before and during the entire project lifecycle.

Identifying the risks is one thing; planning for them is another. And that’s the most important part. But rather than regard it as a reactive measure, approach risk management as a strategic, proactive exercise that can deliver benefits to set your project up for success.

Improved safety

Employee safety is a top concern for any construction project. Accidents and injuries are most likely to occur when workers don’t have what they need to maintain personal or site safety. It could stem from not knowing established safety protocols for a particular project. Not having a comprehensive list of site hazards and their locations. Not being properly protected against dangerous environmental conditions, or how to effectively wear personal protective equipment (PPE). Inadequate training in how to safely operate equipment or tools.

Having plans in place to reduce these risks not only maintains productivity, without downtime, but prevents liability insurance claim filings. These plans could include uploading safety checklists, hazardous materials sheets and equipment operation manuals to a software platform anyone can locate and refer to.

Other technologies can be employed to support and manage construction risk and planning. Augmented reality is an effective, safe alternative to in-person instruction on heavy equipment, particularly because it eliminates the risk of damage to equipment during training or to personal safety when learning how to navigate around site hazards. Drones can be used to monitor job site progress and inspect hard-to-access areas that would otherwise compromise workers’ well-being.

More open communication

Introducing the conversation around risks and addressing them directly are among the first steps in fostering a culture of safety and accountability.

When initiated early in the process, before the build has actually begun, channels of communication open up to ask questions and get an understanding of the role everyone plays in helping prevent risks from occurring, or at least mitigating their effects before they have a chance to worsen.

In particular, involving those with experience in specific risk areas — such as safety, environmental, operations and supply chain — can result in a more well-rounded action plan. From their vantage point, they may be able to identify potential issues that could jeopardize the project that others might miss, and suggest how to best mitigate them. It becomes a collaborative exercise in anticipating and managing risk together, and developing rapport as a working group for the success of the overall project.

Having these discussions gets project leaders and stakeholders addressing the elephants in the room — the difficult issues or risks most people might be reluctant to acknowledge ever happening but that all parties must nonetheless work together to solve. In this way, everyone becomes vested in the desired outcome.

Contingency plans in place

So, let’s say one of the risk scenarios happens. If you’ve done all the upfront work, then you have a turnkey action plan ready to go. This provides a degree of control — not to mention relief — with no last-minute scramble when time and tempers are short.

While the schedule may inevitably be affected, having contingency plans in place reduces not only the potential downtime but the impact on the bottom line, namely your profit margin. That’s because any such plan ideally has alternative cost and timeline estimate scenarios taken into account. How much extra time, money and resources (in terms of labor and materials) are likely to be required? How would the project calendar have to be adjusted? Try several scenarios for the same risk to see how the numbers play out by degree of severity. These can give you a more decisive cost and timeline estimate based on more realistic data, not hunches.

And this goes hand-in-hand with better decision-making. Strategic decisions can be driven by already-prepared data from the plan rather than by emotion or threat of litigation, if a worst-case scenario occurs. Who beyond the project team needs to be sought out for advice and at what stage? When should management get involved? Who are the final decision-makers? Creating a decision tree of sorts as part of the contingency plan can save precious time when a challenging situation occurs by having the escalation protocol accounted for.

Confidence through construction risk management

A risk management plan will require a bit of work in the beginning. But it can become a blueprint on which to base future plans unique to each project. The benefits you stand to gain can set your project up for success.

Of course, not all potential risks are within anyone’s control. But with advance planning and some solid project management skills you’ll have a huge edge over those things that are within your control. Combined with software that includes risk management tools, you can develop a more concrete action plan for the unexpected. InEight’s software solutions include construction risk management capabilities that integrate with planning and scheduling tools. They allow you to account for risk variables and create contingencies around them so you can ensure your project goes more smoothly.

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