Construction is one of the most risky industries in the world. A “risk” is anything that could derail your project and in construction there are many things that can go wrong.
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Construction is very different from many other industries. Manufacturers generally only worry about a shortage of materials, and labour issues. Farmers have to worry about draught, rains and pests.
However, while agriculture and manufacturing each generally have a handful of risks that could affect their projects, construction has all those risks, and even more.
Why? Because no two buildings are the same, every building project presents its own unique challenges. Building projects involve different teams, companies, suppliers, and site conditions, and all of these are in constant flux. Planning and controlling risk is more difficult than in many other more predicable industries.
The best way to manage risk in construction is to be ahead of the game. Knowing what can go wrong, and having a plan for your risks can save you time, money and most importantly, stress.
The 7 Main Risk Areas in Construction
A comprehensive academic research project discussed seven primary categories where construction projects often experience problems. They also spoke to 40 contractors to determine what sources of risk they encounter most frequently. In summary, these were the sources of risk:
1. Design Risks
- Errors or omissions in the design.
- Pace of design extended for longer than anticipated.
- Clients or stakeholders asked for changes late in the process.
- Contractors not following the original agreements or plans.
2. External Risks
- New persons or groups get involved and ask for changes.
- Members of the public are objecting to the project.
- Government regulations or building codes that apply may be modified.
- An unexpected change in taxation.
3. Environmental Risks
- Environmental studies that are incomplete.
- Prototype or new plans to limit environmental impacts.
4. Organizational Risks
- Inexperienced workers or high turnover of employees.
- Late arriving materials or equipment.
- The inability to have safety on-site.
5. Project Management Risks
- Poor quality control or contractual omissions.
- Poor scheduling or delays by contractors.
- Tension within the project construction team.
6. Rights of Way
- Construction permits have expired, or are non-existent.
- On a project legal conflicts or wrong representations.
7. Construction Risks
- Prohibitive cost overruns on the project.
- Changes to the technology used on the construction site create challenges.
The study found that the most commonly experienced risk types were design errors and designing delays. Contractors acknowledged that design errors or delays were commonly the foundational cause for both project delays and cost and quality issues.
Why Risk Analysis Is Important?
It’s understood that construction projects are uncertain. When project timelines become your priority, and your team is already aware of construction risks, risk analysis can seem like just another chore to complete.
In fact, risk analysis is foundational for the success of any construction project so it’s worth the effort for the following:
- Can help with project feasibility.
- Can help mitigate surprise costs and delays.
- Can measure directly to the likelihood of specific projects costs.
- Can provide clarity on if the project will be ultimately profitable.
- May enable lower insurance premiums.
- May reduce likelihood of litigation.
- May preserve reputational and client trust.
A 4-step Risk Management Plan
Risk management for construction does not need to be complex. Research suggests that a simple use of a 4-step process can be very effective:
1. Identify Risks
Gather input from all stakeholders, including owners, engineers, and contractors/subcontractors to develop a comprehensive list of possible failures.
2. Assess Risks
Rank each risk based on how likely it is and the severity to which the project may be impacted. This will help determine which risks need more attention on them.
Then, develop plans to mitigate any priority risks.
Develop plans to mitigate the most serious risks or any risks that you think are more serious and will most likely affect the project. If something does go wrong, you have back-up plans to deploy.
Keep track of the project as the work is carried out. Something may arise that you had not thought about, so do not get too complacent and always be reviewing.
It is a good idea to conduct team meetings regularly to go through these steps again as things change all of the time – these risks can change the risk address can be different from each project.
Related Post: Guide to Improve Time Management in Construction Projects
Using Tech Tools to Manage Risk
Applications such as Plan Radar, are of great support when managing construction risk. The use of this software will not prevent issues from occurring; however, it will allow you to identify them early and deal with them immediately. The biggest win is it centralizes all of the conversations and provides a live update.
Below is how Plan Radar can fit into the 4 stages of risk process:
Identify: On-site workers can tell you what problems there are immediately through the app (and can also attach picture of the issue) so that you don’t forget and things don’t get lost in translation.
Evaluate: You can track defects, design changes, and progress all in one location – and generate reports at the click of a button.
Avoid: When an issue is reported, it’s automatically directed to the right person, with deadlines and levels of priority attached. This keeps everyone accountable and moving.
Track: The app organizes everything from the time you record progress to when you report new risks, so you can respond quickly and avoid project delays.
Conclusions
Construction is a high stakes industry and, as we know, one mistake can snowball into a major issue. But with the right mindset, a proactive approach, and the right tools in place to control and manage risk, you can keep surprises to a minimum and get the project moving.
If you are serious about managing risk for your project, you will be able to deliver your projects safely, on time and budget.
Sagar Telrandhe is a Construction Engineer with a B.Tech in Construction Engineering & Management. Passionate about infrastructure development, project planning, and sustainable construction, he specializes in modern construction techniques, project execution, and quality management, contributing to efficient and innovative building.