So what is the best practical way to ensure a well-planned construction risk management? The answer to this question lies in the right processes and also the use of a construction schedule software. For construction project managers and equity capital providers, further understanding of the construction budget is critical for inherent risks involved in it. Additionally, other various risks associated are environmental risks, financial risks, socio-economic, etc. All types of risks will be dealt with in risk management and will be a subject for further study.
Risk management is all the time considered as a very crucial part of the project management and planning. In the construction industry, the unpredictability and instability of the environment have always been going on; thus, results to many challenges. Risk management is, therefore, becomes a focal instrument that efficiently helps in dealing with various risks, culling out possible challenges or dangers and most importantly, planning remedial steps that means to avert risks in many specific areas. Apart from it, a software tool like project management software has also helped in determining any possible risks using many different built-in features.
A practical guide to Construction Risk Management is outlined in this blog.
The 5 Major Forms of Risk in Construction
In the course of any construction projects, a vast number of risk factors will be expected. In defining construction risks in a much more detailed way, we are going to take a closer look towards the top 5 risk categories that must always be considered during when a particular risk management plan is finally elaborated:
1. Financial Risks
This risk, in particular, has come as no surprise at all. Budget overruns are frequently one of the many biggest threats in a project’s development. With that being said, it is beneficial for the construction management team to define fiscal risks before the construction project even begins thoroughly. Working in finding all possible risks, the use of a construction project management software will make the work easier. Listing, saving, and storing data are all viable and there are many different functionalities designed to help users in everything they do.
Financial risks vary enormously by the type and the particular location where a certain construction project is going to take place. To simplify it, below are some of the most common potential risk factors for financial risk. Take note that, all of the following must be meticulously examined even before the project takes off.
· Local tax system
· Currency rates
2. Risks associated in Project Management Process
This risk is related directly to project management for construction and to its development. In terms of materials, tools, crew, a resource management analysis is considered the first step. Once the project’s needs are already defined, project managers allocate the responsibilities and adequately set a precise time-frame for every task involved. It is advised to be consistent in carefully and wisely think about all obstacles that could abruptly emerge during the process. In that way, project managers are already prepared.
3. Environmental Risks
In a few cases, natural phenomena like floods and earthquakes could be a major threat to the construction project’s ongoing smooth development. Contractors who offer general contracting and other services have already been aware of it. This is the very reason why a particular analysis of the current environmental conditions is a must-do based upon the area where the projects are presently conducted. The managing team should prioritize taking all measures essential to protect all participating workers on the field and the overall progress of the project.
4. Safety Risks
One of the most significant pain points in the construction industry is accidents. Working on-site has required everyone to have great focus and over-attention to details. The project management team must always do their hundred percent best to transform the field into an accident-proof and a much safer place. This goal in making the site more reliable for everyone is easy to obtain now that a construction scheduling software exists. The software tool has tracking and monitoring features where project managers and contractors can supervise well-enough every crew member.
Above all, always keep in mind that this particular procedure is not just a one-time action but continuous. And also, safety planning is executed during the development and design phase of the construction project.
5. Legal Risks
Unsurprisingly, contracts are considered as one of the significant sources of serious disputes between all crew involved in the course of the building process. Therefore, it is necessary to invest extra effort and time to take proper care of various details associated with contractual agreements. Explicit solutions for any potential scenarios must have been firstly predicted and at the same time, the rights and responsibilities for every party involved must be explicitly described as well. This way, a competent legal team is considered an essential addition as it dramatically decreases any potential legal risks in construction projects.
Risk Management Plan – a guideline
The risk management team will now determine the severity of the risks on the projects. Cited below are the guidelines to follow.
1. Determining what the problems are or what can happen ahead
2. Identifying who could be harmed or the significant impact of this in the ongoing project
3. Determining if any of the risks have remained
4. Identify how many risks might abruptly arise once the problem occurs
5. Be good in decision making when it comes to control measures that are necessary to be placed to solve the problem efficiently
6. During the risk assessment, document all the findings
7. In case if the first two made plans weren’t working, immediately create contingency plans
8. Lastly, the above mentioned guidelines should be reviewed and revisions may apply if necessary
The very reason why a risk management team needed to weigh the above-cited guidelines is that the team is looking forward to face little risks as possible. But of course, there is no guarantee that a construction project will be successful without too many risks involved. A successful construction project is able to withstand and overcome the rising challenges.
Selecting the Right Resources in Helping You Manage Existing Risks
Suppose you have already decided to mitigate the risks after finding it all out. In that case, today, there are different resources that could help you further optimize the risk management choice. Take a look below.
1. Project Management Software
All assigned tasks are a lot more manageable and faster to process using the best construction management software like Pro Crew Schedule. Every aspect of the construction project, including the development, can all be managed so well. Any construction companies, particularly those rising in the industry and currently handling increasing numbers of projects, have to use this software tool. It is proven already to be very beneficial since the tool is also specifically designed to help construction professionals in managing risk.
Whether you have been using construction credit lines or not, they are often considered a reasonable precaution. Having and using this financial cushion will allow you to accept various risks like late payments or perhaps payment disputes from the clients.
There are many instances that some of the construction risks are not part of insurance. Nevertheless, insurance is still a good option because an insurance broker is capable of advising to you regarding local authority requirements, including the ins and outs of SDI or subcontractor default insurance. Additionally, CCIP or contractor controlled insurance programs can also be easily determined through this.
4. New Methods and Technologies
Over the years, many changes have become apparent and that includes new methods and approaches. Some of the risks today that were already accepted before can now be immediately mitigated and diminished using the newly formed strategies. For example, bad weather that usually occurs seasonally and most of the time, unpredictably, could have a much lesser impact. Using the prefabricated building modules, the construction time while building onsite could be greatly reduced from the lower effect of bad weather. On the other side, devices like drones can also be helpful tools that can reduce safety hazards and save more time.
5. Professional Advice
Some of the most common sources of advice solely for construction professionals include legal firms that specialize in construction litigation and contracts. However, there are other sources that construction companies usually overlook, one of which is the organizations that generally issue surety bonds. Construction companies have to know that a relationship is capable of protecting the clients by guaranteeing that the projects will finish regardless of what might happen. In deciding whether to issue surety bonds, the issuing organization will start to investigate the contractor’s business. This is where the identification of all risky business practices will be executed.
Overall, risk management is just proven to be one of the most crucial aspects of any construction project. With the continuous rise of cutting-edge digital technologies today, determining the risks has become more natural. Furthermore, it is always a good thing to remember never to be daunted by any risks for it can be a way of further realizing the situation and be more prepared.