Construction sites are some of the most dangerous places to work. The construction industry is one of the highest risk industries in the world, and as such, it is important that those who enter these environments understand how to mitigate potential risks.
It is important to know how construction sites are organized. There will be a single client, who may be an individual or an organization. The client hires the main contractor, who hires subcontractors to complete specific tasks on site. Construction teams within each company can range in size from just a few individuals required for small projects to many hundreds of workers for large and complex projects. Construction sites should be organized into a hierarchy to ensure that individuals know their roles and responsibilities, as well as those of others around them.
Construction risk management is important in every enterprise’s operations to manage their projects efficiently. An accurate risk management plan must have easily and thoroughly understood processes. More safety issues and growing costs in recent years exacerbate those concerns. The safety risk is crucial in the construction risk management sphere .construction risk management process risk factors should be addressed and should include:
– Construction project management
– Construction site organization and location
– Construction contract administration such as change orders and payment conditions.
A construction risk management process should not conflict with the goals of other processes such as strategic planning, financial controls, human resource procedures, and procurement. Construction risk management is complex. Project risks of construction project output is a project risk management plan. The project team will ensure a risk assessment exercise that will come up with risks and how to manage risk.
This article will explore what you need to know about construction site safety and how you can keep yourself safe on a daily basis.
Understanding Risk Management
Construction risk can be defined as an obstacle to the progress or completion of a construction project that creates possible loss exposure. Risk is present in the construction industry throughout the entire project lifecycle from preconstruction until final delivery. The complexity of construction of all types and sizes creates a constant climate of uncertainty and risk. Risk is even cheaper. Contractors must deal with the controversy which leads to litigation eventually. Overall disputes have increased from $16.3 million between 2018 and $18.8 million in 2019. Construction disputes have escalated in 2019 thanks to poor construction or incomplete claims.
A risk management plan has evolved drastically in the construction industry. It was not until the mid-1980s that risk management started to gain popularity, partly due to a rise in property development projects following deregulation of the banking system. With an increase in international development work, engineers are becoming more aware of different cultures and are being asked to undertake work abroad where safety factors or other legal implications may be significantly different from those in the UK.
The main feature of construction risk is uncertainty inherent in the construction process, so it cannot be eliminated but can only be controlled and managed. It is necessary to improve the understanding of the concept by establishing a relationship between the degree of uncertainty and the probability that this might happen. As far as possible, any risks should involve risk transfer, that is, it should be insured.
Construction risk management has been defined as a process for managing significant risks in a project throughout its life cycle so as to ensure the achievement of client objectives within timescales and budget constraints whilst maximizing value for money. Project managers need strategies to identify and control the construction risks during all stages of a construction project life-cycle.
The financial risk inherent in the construction industry is due to the fact that it is an engineering-driven industry in which the complexity and uncertainty of design and scope creep that cannot be eliminated. safety risks due to the hazardous nature of construction sites.
Project management on the risk exposure of construction sites involves risk assessments that are done systemically to provide growth in the construction management sphere. It provides some basis for making decisions on how to minimize risk exposure. The primary aim of construction risk management is to achieve three objectives; selecting, planning, and implementing control measures that help reduce or avoid risks.
Safety hazards for construction sites are safety risks that are linked to the actual physical environment; factors as weather, traffic hazards, and related factors. Risk exposure can be reduced by using what is called sound engineering principles. This involves utilizing the necessary steps like the use of up-to-date safety standards, latest technology along with monitoring safety performance requirements.
Safety hazards are prevalent in construction projects. Such hazards can cause bodily injury or property damage. This is usually caused by negligence, the lack of attention to detail, and failure to adhere to safety standards. Damage construction sites due to natural disasters caused by climate change taking center stage in the destruction of critical infrastructure. As a result, the construction project has led to the loss of lives and property. There are instances where prolonged construction activities have resulted in fatalities due to accidents.
Construction projects often take a long time to complete, which may lead to extensive damage due to natural disasters or poor weather conditions. Often, these factors cause an increase in accidents on site. Construction project managers need to take responsibility and be accountable for the actions and decisions they make so as not to jeopardize lives or incur cost overruns that could affect their projects.
Insurance companies have policies for worker accidents, it might curtail the increased profits of firms. The project risks change after an incident as occurred in consultations with other team members. The project is less likely to complete on time, overheads are increased, overall it reduces the company’s profitability. Construction project risks are managed to obtain effective risk management
People who work in construction sites are generally referred to as construction workers. Compensation laws cover employees of closely held corporations. While most contractors have insurance that covers accidents at their worksites, many contracts spell out how insurance claims should be handled. This should be considered by engineers during the design phase or when making changes to a project.
High probability risks derived from risk assessments will be updated in the project risk register to monitor common risks that will affect profit margin and increase financial risks of an entity having a negatively impact
Construction Risk is Everywhere and is often found in Construction Sites.
This method of documentation used by GCs(General Contractors) can make or break a successful delivery of projects. This’s particularly true of anything which could be interpreted as a revision to contracts for new services or as an update of work schedule. With delays in material supply, accelerated costs, and other issues brought on by the Pandemic, proper documentation is crucial in accessing detailed reports. Documentation, always important to manage risk in construction projects in the best times big and small is vital in the worst of times when forces outside that GC control affect projects including the Ebola epidemic.
Contingency plans are always important in construction. However, the existence of a contingency plan does not mean that it is ready to be implemented when necessary. Contingency plans are rarely accurately prepared in advance and once they are required to be activated, they must be put together quickly. The result often leads to problems caused by lack of accuracy or detail needed for adequate contingency creating potential disputes on its execution.
Hold brainstorming sessions with project managers and personnel involved in contract administration to identify those areas that need an immediate response. Be sure to document the results of the discussion as input for your contingency plan. Documenting a preventive mitigation system makes it easier for everyone to understand how risk management is incorporated into project delivery.
The insurance provider will most likely ensure key elements of construction risk under general contractors to provide rewards for insurance purposes. It might be necessary to consider the types and amounts of insurance desired and what is affordable.
Be sure to examine the benefit of different types of insurance coverage before purchasing. Often companies assume, for example, they must purchase liability insurance when in fact there are other forms of protection that would provide better quality service at a lower price.
Quantitative elements of a construction risk management plan
Inherently risky industries rely heavily on quantitative risk analysis. When these risks are quantified the project team can develop effective mitigation strategies or contribute appropriate contingencies to the project estimate. The result depends on the amount and accuracy of your data. For better results, the best analyses of the various risks are carried out simultaneously. This approach provides you with the best possible view of the potential risks and their impacts on the successful results of your project. For example risk A may have an average 60% chance of occurring if the data are accurate such as fluctuations in the cost of resources, average activity completion time, and logistics.
Qualitative elements of a construction risk management plan
All risks with positive impacts on project progress are examined for a quantitative risk assessment. It measures both the risk of a specific risk event occurring in the project lifecycle and the impact that would have on the project’s schedule if it happened. Qualitative analyses are descriptive and focus on factors that can be observed but not evaluated. The benefit is it enables you to estimate the probability and prioritize risk in an easily digestible way to present it to stakeholders. It can be used to handle risks at any stage of a project and at any point. Statistical analyses are performed that consider dimensions that could not be measured in numbers.
Benefits of Construction Risk Management Plans
- A risk management plan provides a business a clear picture of risks, reduces their likelihood, and provides a systematic way of making better decisions that help avoid future risks.
- Increased project visibility and flexible mitigation strategies.
- Better decision making by anticipating problems before they happen
- Risk identification that is thorough, accurate, and precise with regards to the scope of the risks.
- Mitigation plans can be agreed on early in a project lifecycle with clear timelines and deliverables.
Benefits of Risk Management in Construction
- The risk management plan gives your company great stability and security. While developing a security-aware plan is hard work, well-designed risk management is critical for your organization. Good risk management provides the following benefits to your company:
- The identification of risks and opportunities.
- Improved project priorities.
- Reduced costs due to improved planning and preparedness for mitigating risks/opportunities.
- Increased project success rates through proactive decision-making and faster response times.
- Construction Risk Management Plans (CRMP) is a plan to manage risks associated with construction projects. A CRMP can be used to identify, prioritize, and establish contingency plans for the most important aspects of a project’s performance throughout its life cycle.
- A CRMP comprises four main phases: Risk Identification, Risk Analysis, Risk Response Planning (Risk Treatment), and Risk Implementation (Risk Implementation). The following are the four steps of CRMP:
- Project Scope Definition
- Risk Identification
- Risk Analysis (Quantitative Risk Assessment)
- Risk Treatment (Quantitative Risk Response Planning)
- Construction Risks Monitoring and Evaluation.
Construction Risk Management Solutions
There is software suited for construction risk management purposes. it will be largely designed for Subcontracting specialists for construction companies, General contractors, and land developers. It will be an effective Construction Risk Management solution.
The Construction Risk Management Software offers an easy-to-use yet powerful solution that helps you capture, track and monitor your project as well as the subcontractor’s tasks. Examples of construction risk management software solutions include:-
The power of technology for contractors is a crucial aspect for any construction business to ensure that it minimizes the risks and makes the most of opportunities. Construction Risk Management software helps streamline processes, provide timely alerts and enable collaboration with ease between all stakeholders.
The Construction Risk Management Software enhances productivity by enabling subcontractors to upload status reports and photos to the cloud and allowing all parties involved in a construction project to access and share important data and documents with ease and convenience.
Construction Risk Management software is able to help companies manage their risks. This includes safety risk management, quality control, environmental impact, and financial issues. Construction risk management programs are similar to ERP systems in that they integrate all internal functions of a company into one program.
What are the Five 5 categories of Risk Construction?
1. Identifying risks that may hurt people or property;
2. Defining the level of harm that must be prevented;
3. Preventing injuries, damages, and deaths by putting protective measures in place;
4. Setting up disaster management policies to predict and prepare for any disasters or emergencies;
5. Avoiding unnecessary risks through preventive strategies like transferring responsibility without trying to solve the problem with explanation or justification
What is Risk Management in Building Construction?
Risk management in construction is an ongoing process that prepares an organization for all possible events, including natural disasters and unsafe behavior. A general contractor will hire subcontractors to help with the work. The subcontractor is then responsible for hiring their workers (usually they pay the worker themselves). At each level of this hierarchy, there are multiple risks that arise. An excellent way to mitigate these risks includes an assessment of hazards at every point before work begins so everyone knows what they’re in for and how to prepare for it, avoiding people who can’t do their jobs well or who might be dangerous, making sure things are stored away securely when not in use, ensuring proper insurance has been taken out on necessary equipment or materials, etc
What is the 5 Risk Management Processes?
Risk management doesn’t have a one-size-fits-all strategy, but you can’t escape the following five basic processes for addressing risks.
1. Identification of threats and vulnerabilities
2. Evaluation of potential consequences or impacts on organizational objectives
3. Evaluation of likelihood or probability that a threat will manifest as a vulnerability
4. Reduction or elimination of threats using risk mitigation techniques such as redundancy, testing, access control procedures, etc.; these are the “what if” practices that help an organization guard against future threats to its operations and assets
5. Monitoring for realized threats from past actions which didn’t previously elicit concerns–but this step is highly reliant on vigilance and is only possible with retrospective assessment approaches.
Chris Ekai is a Risk Management expert with over 10 years of experience in the field. He has a Master’s degree in Risk Management from University of Portsmouth and is a CPA and Finance professional. He currently works as a Content Manager at Risk Publishing, writing about Enterprise Risk Management, Business Continuity Management and Project Management.