The construction industry involves a complicated mix of stakeholders, technical processes, and a never-ending string of curveballs thrown your way. To circumvent the diverse array of challenges, you need a risk management system. With a risk mitigation process as part of your infrastructure, you can spend less time worrying about uncertainties and more time growing your business. Here’s a straightforward analysis of risk management in the construction industry, what it involves, why it’s important, and key strategies you can start implementing now.
What Is Risk Management in the Construction Industry?
Risk management in the context of the construction industry involves identifying, analyzing, and mitigating any risk that could interfere with successfully completing a project. Another element of risk management is making sure you insulate yourself from financial risks that could impact your solvency. For example, you need to have tools in place to manage changes in the economic environment or competitive landscape.
Why Is Risk Management Important in Construction?
Risk management is imperative in construction because relatively small events can have drastic effects on project timelines and feasibility. But by using risk management software, you can identify and mitigate or reduce risks before they impact your bottom line. In this way, you can ensure:
- Consistent project success. With risk manager software, you can make sure risk incidents, such as weather events and failed equipment, don’t interfere with completing your projects.
- Effective cost control. By identifying and sidestepping risks, you can ensure the timely completion of projects, which can boost your profit ratios. On the other hand, when risk incidents extend your timeline, paying workers by the hour or day can easily eat away at your profits.
- Improved safety on jobsites. Using the best risk management software, you can identify trends that may indicate safety issues. With this data in hand, you can make adjustments to improve safety, protecting your most valuable asset: your workers.
- Alignment with compliance standards. Whether it’s OSHA, ISO 14001, ISO 9001, or building codes, you can use risk management software to ensure compliance, satisfying whichever governing body you need to.
Strategies for Risk Management in Construction
Using the following strategies, you can create an air-tight risk management system, protect your profits, and expand your business more aggressively.
Identify and Categorize Your Risks
With your risk management software, you can identify your entire portfolio of risks and then specify which ones apply to specific types of projects.
To illustrate, suppose your company covers a relatively large area, with some of your territory bordering the sea and the rest of it sitting as far as 100 miles inland. Naturally, you want to insure all of your most important equipment. However, the machinery you use for jobs closer to the sea has different risks than the equipment you operate inland—and vice versa. For instance:
- Equipment near the sea is far more prone to corrosive rusting due to the sea air, including those with stainless steel components. This may impact their operational lifecycles, maintenance procedures, and insurance coverage.
- Equipment further inland may have to deal with bumpier, rougher roads, impacting suspension systems, tires, and powertrains. You may need to adjust your maintenance or coverages accordingly.
The list, of course, goes on. Taking all considerations into account is far easier when you use a risk management solution, which enables you to collect risk data, analyze it, and create templates for mitigating each concern.
Use Data Analysis to Predict Future Risks
Data analysis using risk management software is a powerful tool for predicting, preventing, and mitigating construction risk.
For instance, you can open your software and juxtapose historical weather data with your completion timeframes for the same period. You may see, for example, a direct correlation between the number of rainstorms and how long it takes you to complete each project.
With this data in hand, you can tell a prospective new client, “Given the average rainfall for this area during the month of October, the project may take 15% longer than it would a month from now. How about I shift another project until later in the year and get started on yours next week?”
Establish a Risk Communication and Monitoring System
You can’t mitigate what you can’t see, which is why risk management software plays such a central role in minimizing the cost of risk. With your software, you can set up a reporting system for project managers to submit risk data, new risks, and thoughts regarding potential risks down the line. You simply log into your risk management platform, check the information that’s been submitted, and make decisions accordingly.
For example, suppose you have a project that requires a lot of glass, including doors, windows, and architectural features. Your procurement and logistics manager tells you that your primary glass supplier is having some supply chain issues. A container they had been expecting got delayed in China, pushing all deliveries back a month.
You can include data regarding alternate suppliers for glass, steel, wood, and other building components. After getting this info from procurement, you can simply pull up your platform, get the contact info of alternative suppliers, and start negotiating prices and timeframes with them.
Identify, Organize, Analyze, Predict, and Mitigate Risks
Ventiv’s risk management software gives you the ability to identify, organize, analyze, predict, and mitigate risks across your operational infrastructure. You can also use it to communicate with other stakeholders so you can combine minds for more effective decisions. Chat with an expert to see how Ventiv’s IRM is right for your organization.
