Construction is a vital industry that contributes to the growth and revitalization of cities located across the globe. It’s also an inherently dangerous industry due to the risks placed on employees when performing work on-site. Understanding construction risk management and how to manage it can help a construction company mitigate its risk and respond to situations with compromised safety.
Risk management is a process that involves determining the risks present in a particular industry or for a business. It also includes the assessment of the procedures in place that help minimize these risks. Since construction work involves heavy-duty machinery and potentially dangerous equipment, managing the risks in this industry can be more complex.
Construction workers also work outdoors, exposing them to natural disasters and climate conditions. Understanding the risks involved with this type of work is the first step in creating a risk management plan.
Along with the physical safety risks placed on workers in the construction industry, construction companies have other risks that they must understand and mitigate when possible. One example is the financial risk involved with taking on a construction project of any size or scope. Some factors impacting a company’s financial flow include economic downturns, cost increases in materials, and a decline in trust due to safety concerns. Failing to manage resources properly can also put an additional financial strain on a project.
Construction companies take on legal risk when performing work for a client, especially when the client isn’t happy with the finished product. As long as contracts allow for legal action, a client can sue the construction company responsible for building a structure on its property. Clients may also take legal action if they believe a company has failed to fulfill the terms of its contract.
It’s essential to prioritize the risks on a particular job site to manage threats and reduce negative outcomes as much as possible. Some of the risks outlined above might affect other companies but not apply to a specific job site or other construction companies.
Project managers should prioritize the risks on their job sites based on importance, focusing on the potential impact on the job’s progression and the odds that each risk will come to fruition. After prioritizing risks, a project manager or company leader can handle the risks that would cause the highest impact on the project and have the highest probability of occurring. For current project managers, one significant concern is material cost increases, which are highly likely to occur and have a severe financial impact on the project.
By taking a proactive approach to risk management, construction managers can mitigate some of the risks on job sites of all sizes. Working with a legal representative who understands the industry and its risks can also lessen some risks. Cokinos | Young is a trusted law firm specializing in construction law that can assist with risk management. Learn more by contacting the team of legal professionals today.