Risk management is an essential operational process across almost every industry but is particularly important in the construction industry. The dynamic and complex nature of construction projects and the associated wide-ranging risks make adopting a risk management culture critical to project success. Integrating risk management into every phase of the project lifecycle involves assessing risk exposure, planning for risk, and monitoring risk.
Assess exposure to risk
According to the Construction Industry Institute (CII), project risk assessment is used to identify, assess, and manage risks on a project and is an effective method for determining the degree of project risk. Project risk assessment:
- Identifies and describes critical issues related to a project, allowing the project team to focus on risk factors of potential concern
- Evaluates the project risk exposure and indicates its potential impact of risk during the project’s life cycle
- Indicates which components of the project should be considered for risk mitigation as part of an overall risk management strategy
- Focuses analysis on issues unique to each project
- Is flexible to meet the needs of almost any individual project
Plan for risk
This stage of managing risk involves developing plans to minimize high-impact risks. Running through “what if” scenarios, determining specific protocols and actions to mitigate risk, and assessing the costs and benefits of each mitigation strategy are all key elements of planning for risk. While some risks such as environmental risks can’t be avoided, proactively planning for risk response can reduce the project’s impact.
Monitor for risk
Risks evolve over the lifecycle of each project, making it critical to monitor for risk regularly. Regularly assessing projects and scanning for risk surfaces the information needed to adapt strategies as conditions change and make more informed decisions on moving the project forward.
Benefits of reducing risk
The right risk management processes and tools can help construction firms reduce risk, which yields significant financial and operational benefits, including:
- Improving financial results
- Increasing safety
- Enhancing transparency, efficiency, and productivity
- Streamlining and strengthening decision making
- Elevating the quality of construction execution and project delivery
- Avoiding costly claims, disputes, and litigation
Keeping risks under control can be challenging for contractors operating in an industry fraught with risk. Construction projects are becoming increasingly complex, and disputes are multiplying, making it even more critical than ever for contractors to take steps to minimize their risk exposure.
From project risks to financial risks, safety risks, and more, mitigating risk is a daily part of the job for general contractors (GCs). To reduce their risk exposure and protect profitability, GCs can turn to RedTeam’s construction management platform.
Using RedTeam’s construction management platform, GCs can inject seamless collaboration, streamlined workflows, document control, and accuracy of information into all of their projects to reduce risks, bring more certainty to construction projects, improve project outcomes and increase profitability.
You can read our full breakdown of construction risk management at https://www.redteam.com/construction-risk-101-understanding-risk-management/!