When it comes to commercial construction, there are always certain risk management issuess to be aware of with any type of project. So, it’s important to assess potential risk from land prep through the final walk through in order to ensure projects are completed safely, on time, on budget and as promised.
Below, we break down what commercial construction risk management is and how it works.
What Is Commercial Construction Risk Management?
There will always be some degree of risk involved in any commercial construction project. There are certain things that you cannot plan for, like natural disasters or material delays. So, it’s vital to have a plan in place to deal with these potential risks to limit their impact on the project.
While you will never be able to reduce the risk to zero, identifying what you can control is a vital part of any commercial project.
So the goal of commercial construction risk management is not to eliminate risk, but rather to have a plan for how to respond to any given risk. This means that construction teams will be prepared in the event that a particular risk does manifest.
Types Of Construction Risk
Here are the different types of construction risk:
- Safety risk: A construction site can be a dangerous place. Construction companies need to ensure that they have sufficient safety precautions in place to prevent any accidents or injuries.
- Financial risk: These are factors that can affect the costs of a project. Financial risk can be anything from delays in construction to inflation, the cost of materials, labor shortages, and poor management.
- Legal or contractual risk: These are any legal constraints that the construction team must deal with. For example, permits, regulations, contract disputes, and code violations.
- Environmental risk: These include things such as floods, fires, earthquakes, tornados, etc. in the nearby vicinity.
- Project risk: These are risks associated with the management of a project. For example, a poor management system, mismanagement of supplies, poor time management leading to falling behind schedule, and so on.
Managing Commercial Construction Risks
With so many different kinds of commercial construction risks, it’s vital to have a commercial construction risk management strategy in place. Here is the general process for managing risks for a construction process.
Identify And Prioritize Project-Specific Risks
The most important thing is to understand the risks of a specific project because each project is unique. Once the construction manager has made a comprehensive list of risks, they will then need to assess the likelihood of them happening.
This then becomes a way of prioritizing risk management. Large risks that have a high probability need to be considered first, whereas smaller risks with less likelihood are less urgent.
Reduce The Risk
Now the construction project manager and leadership team needs to decide how to deal with the identified risks. There are several approaches to take.
Avoid The Risk (If Possible)
Sometimes, it’s possible to simply avoid the risk through proper planning. A good example of this is when it comes to worksite safety.
If there is some particular risk, such as working with hazardous materials, then managers can ensure that all employees are fully aware of the necessary safety precautions.
To avoid risks like delays and misunderstandings, it’s vital to be clear in communications with the team and the client. For example, workers must know what they are responsible for on site and clients should be given realistic timelines for deadlines and deliverables.
Mitigate The Risk
If the risk cannot be avoided, then it needs to be mitigated. There must be a contingency plan in place should the risk occur and things do go wrong.
Preparation is the biggest asset when it comes to managing commercial construction risks. Project managers must identify what they can control, and have solutions to execute when problems occur. It’s important to break the potential risk down into small, actionable tasks that will help reduce its negative impact on the project.
Accept The Risk
Sometimes, the risk associated with a project will be unavoidable, but the project is still very doable. In this case, the team may simply accept the risk.
This could be things like taking on a building project at a time when there is inclement weather, or in a populated area where the potential for accidents are higher.
Implementation And Monitoring
The last steps are for the construction team to implement the risk management plan. This is where they put measures in place to mitigate and reduce any foreseeable risks that were identified.
Lastly, the construction manager needs to monitor the risks identified and keep an eye on these areas as the project progresses. This way, they can see if their risk management strategies are working or need adjusting.
Conclusion
When it comes to commercial construction risk management, you can never completely eliminate risk. However, you can identify and understand the risks.
This enables construction teams to plan better and help keep projects on track for a successful outcome.