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Risk Management on the Jobsite

Kevin Sage
November 17, 2023

Whether you are waterproofing a deck, resurfacing a pool deck, or installing floor epoxy, various risks can occur to your project. Ameliorating these risks quickly and properly is vital to the efficient and economical completion of that project. By understanding construction risk management, you make any concrete sealing, decorative coating, or decorative staining project go as smoothly and successfully as possible.

What is Construction Risk Management?

Construction site risk management is a system or process for identifying risks that could affect a construction project, evaluating their potential impact, and implementing processes and procedures for reducing that potential impact on your projects.

A construction site risk management plan details the potential risks that could occur during the project and what steps you will take to remedy them, including determining which crew members will take accountability for addressing each given issue. It enables project managers to monitor, notice, and mitigate risks whenever they arise. Ideally, you’ll develop this plan early in the planning phases of the process.

By approaching your project strategically this way from the start, you can predict the chances of undesirable events occurring to minimize those chances and any possible loss from them if they do occur.

There are a range of tools to help with the process of construction risk management, but successfully managing your construction risk plan is based primarily on hard data. There are many forms of risk data, including:

  1. Analyses of safety on the jobsite
  2. Internal financial documents
  3. Economic and industry reports

How successfully your company can minimize the risks and maximize the results of a project relies directly on how the company collects this past-performance data, analyzes it, and proactively implements systems to address potential areas of concern. By reviewing your company history, you may find lessons you’ve already learned that you can apply to current projects and their potential risks.

Types of Construction Risks

Fully comprehending how you can manage a project’s risk requires first comprehending the various types of construction site risks you may encounter on that project. These may include matters of finances and economics, law and politics, safety, design, labor, and other factors of operation.

Financial and Economic Risks

Financial risks and economic risks both involve money matters, but financial risks involve internal financial matters within the company, while economic risks involve external financial matters affecting the economic climate in which the company operates.

Financial risks include factors that can diminish cash and impede growth, such as:

  1. Slow payments
  2. Increases in the cost of materials
  3. Liquidity risks
  4. Credit risks
  5. Market competition
  6. Fraud

It may have become an industry norm for projects to go over budget, but poor planning and coordination are the real source of financial issues. This can impact liquidity now and in the future, your ability to pay your workers, and keep the project moving forward.

Managing financial risks helps keep a project within budget while ensuring you can meet your deadlines, pay your workers, and execute the design to the client’s satisfaction.

Economic risks can cause project funding to diminish, market opportunities to be depleted, and construction costs to rise. Such risks include inflation and recessions.

Legal and Political Risks

Legal risks can come from a variety of directions, including:

  1. Regulations and code violations
  2. Litigation
  3. Disputes with vendors, subcontractors, and clients

Political risks might not seem to affect small-scale construction projects like deck waterproofing much, but they’re still good to be aware of because those risks are not just global; they can also be local. Political risks don’t just include dramatic events like civil unrest or terrorism; they also include minor changes in the political power dynamic that can impact factors like worker safety, funding, and timelines.

Safety and Design Risks

Your most valuable resource on a construction site is your crew, and the construction industry can be a dangerous one in which to work. No matter how skilled and experienced your crew may be, accidents can still occur.

Injury rates and death rates from accidents on the jobsite are high compared with other industries. The more a construction risk management plan accounts for worker and client safety, the better you can prevent harm from coming to anyone involved with your project. A thorough safety plan includes ways to minimize hazards and prevent harm from coming to your workers.

In this modern age of digital technology, companies must contend with another type of safety risk, namely cybersecurity risks.

Design risks must be managed carefully to ensure the finished product meets all expected parameters, including timing and deadlines. By accepting an unsatisfactory or incomplete design, a project starts on the wrong foot from the get-go. It will force the team to back-manage those problems that arise from a poor design, delaying the pace and completion targets of the project.

Operational Risks

Day-to-day, project-related risks can derail a company’s objectives if they’re not anticipated and planned for. These include issues like:

  1. Scheduling matters like delays and missed deadlines
  2. Worker interruptions
  3. Insufficient funding
  4. Poor resource management
  5. Failing equipment
  6. Weather and other environmental conditions such as hurricanes, earthquakes, and floods

The Construction Site Risk Management Process

Best mitigating all these construction site risks requires the same process as managing risk for any type of project, as follows:

1. Identify the risks.

To identify the possible risks to your project, consider what risks the customer or project presents. Any potential threat that may expose the project to loss is considered a risk. Account for all the aforementioned types of risks in this assessment.

2. Evaluate the impact.

Once you’ve identified all the potential risks to a project, you must next determine certain factors of the risk, including its potential probability, frequency, and, above all, severity.

A key component of this phase is recording and tracking financial and project historical data. The more data from past projects you have available to analyze, the better you can accurately assess the potential risks of any current or future project.

3. Prepare your response.

For any identified risk, there are four basic ways a business may respond to it:

  1. Accept it: A risk may be entirely acceptable, such as an investment in a worthwhile opportunity; in such cases, there’s nothing to do about the risk other than take it.
  2. Avoid it: You can prevent any risk from happening if you simply decline the contract completely in the first place; if you accept a contract, you can still at least alter the scope of your work to avoid the identified risk.
  3. Control it: Sometimes, a loss event is a risk you have to take, in which case you can identify measures to implement to reduce its likelihood or mitigate how it impacts your company. For instance, on high-risk projects or particularly large or extensive ones, you can avoid a missed payment or reduce your impact if it occurs by opting to protect your rights to impose a lien.
  4. Transfer it: In case of project risks you can’t or don’t want to manage, you can design the construction contract or utilize an insurance program to pass along those risks to other parties.

4. Recover your losses.

If a loss event occurs, you should minimize your losses and recover any damages. This kind of mitigation and recovery can come in a variety of forms, such as:

  1. Placing accounts in the collection
  2. Filing a payment-bond claim mechanic’s lien
  3. Filing an insurance claim
  4. Filing lawsuit
  5. Declaring bankruptcy

A solid risk management program for a construction company should always include loss prevention and recovery policies and procedures.

5. Review the results.

Every so often, you’ll need to review your risk management program to evaluate its effectiveness. Consider its failures and successes, then update your risk management processes and procedures to incorporate the lessons you’ve learned.

The process of managing risk at a construction site demands rigorous analysis and ongoing improvement. You should always adjust it to reflect prior performance and overall industry changes.

As the construction industry landscape changes over time, so will the risks companies in the industry face. Continuing to help create attractive, desirable, livable homes throughout these changes will demand constant vigilance and a commitment to developing ever-new strategies for mitigating and managing risk.

If you need your deck waterproofed and want to work with a construction company that plans meticulously for construction site risk management, look no further than Orange County waterproofing. Give us a call today to see how we can safely, affordably, and effectively help you.