Any construction project is vulnerable to several risks. The nature of risk can be varied. The main aim of parties that are involved in a construction project will strive hard to minimize the risks and maximize the profit margins.
Since we are already aware of a few aspects of the risk management process, let us quickly recall what it is in brief. When you talk about construction risk management, it entails the following-
- You identify the potential risks that are involved
- Evaluate or assess the impact it will have on the project
- Decide upon the strategies that will help in minimizing the impact of the risks or risk itself
- Implementing the procedures that we have decided upon.
There are several tools involved in effective construction project risk management.
Although there are different processes, and all of them are inseparable, and you cannot afford to bypass any, identifying and analyzing the risks in construction projects are two of the most crucial. As such, in this article, let us discuss these two processes involved specifically.
Identifying the risk in construction projects
The essential answer that you must find out is a solution for the question- the type of risks that are projected either from the project itself, the other parties, or the customers.
Generally, these are the types of risks that you might encounter during a construction project life cycle. These include-
- Financial risks – These are the instances when they need to be addressed
- Payments are slow
- Spiking cost of construction
- Fraud
- Crunch in cash flow
- Growth disruption
- Credit risk liquidity
- Safety risks – Since this is an industry that is full of risks, the rate of injury and death for workers while on duty must be curbed as much as possible.
- Legal risk – It is an industry where litigations are high, and since the industry is highly regulated.
- Economic risks – Few factors like inflation, recessions, and various other economic aspects might lead to a shrinkage in the market opportunities. Such a scenario might also cause a surge in the cost of construction and exhaust project funding.
- Operational risk – Delays in schedule, interruptions from the workforce, lack of funds, failure of equipment, and natural conditions in the environment like hurricanes, floods, etc, pose risks too.
What can you do about risk identification?
Once you have identified the types of risks in any construction, analyzing the Project risk management is your next step.
Your solution will depend on the type of risk that is likely to threaten the project life cycle. Steps to take-
- Maintain a risk register template. Not only that, document all discussions. This will help you to look up again at a later stage.
- Talk to the clients and all the other parties. Seek their suggestions and views.
- Conduct a brainstorming session and work out the probable solutions that are feasible, keeping all the parties in mind.
- Depending on the possibility of occurrence, and severity, plan a strategy.
Analysis of the risk management Process
In the practice of analyzing the risk, the most crucial step is to prioritize the risk. Since different types of risks pose a threat to the project construction life cycle, find out which risk you must prioritize. That risk which has the highest probability of occurrence and has higher severity, needs attention first. In this way, in order of their decreasing risk priority, work out the plans to minimize the risk.
Finally, you must keep a team ready. In other words, assign the task of risk management to a team that will jump into action in the event of any one of the risks occurring.
For more information on how we may extend our help in employing the best practices in risk management, you can approach us at enquiries@contractsquare.co or call +91 9903023893.
