Construction zones are full of risks, from environmental hazards to worker safety concerns.
Failing to identify and account for these risks properly threatens to derail construction projects and drown them in a sea of fines and additional liabilities.
Construction risk management requires top-down compliance from your construction managers to staff to ensure proper compliance and successful results.
However, to combat and mitigate risks, construction managers should develop a construction risk management plan with best management practices (BMPs) to respond to risks as they occur.
The following is our guide to construction risk management and the five essential elements of optimizing your construction risk management template.
What is Construction Risk Management?
Construction risk management is the active effort to reduce or eliminate any risks associated with a construction project.
Risk assessment plans of construction involve five key elements, which we will discuss in detail later:
- Identifying risk
- Assessing risk likelihood and damage
- Planning to reduce risk
- Monitoring ongoing areas of identified risks
- Reporting to relevant stakeholders
In order to create a proper risk management plan, construction managers can hire a team of consultants well versed in different areas of risk.
On the other hand, risk management software is available to help managers track and monitor different risk areas.
In addition, risk management software is beneficial for managing workflow to avoid scheduling delays and tracking financial costs to reduce going over budget on projects.
Seeking out proper consultation and optimizing BMPs around construction risk management will benefit your construction project.
Benefits of Construction Risk Management
While contractor risk management often focuses on the negative aspects, a proper construction risk management plan can make your project more profitable.
Here are just a few ways construction risk management will improve your construction project results:
- Improved financial results by staying under budget
- Improved worker safety
- Improved environmental safety
- Regulatory compliance
- Reduced liabilities from injury, fines and, litigation
- Improved communication and transparency by tracking risks
- Improved workflow by taking more active management over projects
In total, construction risk management provides your team with greater confidence and reduces the risks of the unknown, which derail so many projects.
With that in mind, we’ve created a construction risk management template to help you effectively craft a risk management plan that will leave your teams better prepared for the unknown.
5 Critical Elements of a Construction Risk Management Plan
1. Identify Sources of Risk
First, it’s critical to understand how risk manifests itself in construction zones. Typically a construction risk management plan should actively track and focus on five critical areas of risk management.
- Worker Safety
Construction zones are rife with safety risks that threaten the health and well-being of employees. Employee injuries are not only devastating personally, but they come with a host of financial and legal liabilities your business can’t afford.
Work with your crew to identify any potential areas of risk, such as falling debris or hazardous material, and write down any areas of concern. Once identified, you can educate your team on BMPs to help avoid risk and improve worker safety.
- Environmental Safety
Work zones are full of hazardous material that can harm the surrounding environment. Unfortunately, while storing hazardous materials may prevent the washout of dangerous materials like oil and paint, they won’t prevent sediment and erosion from rainwater that sweeps away dirt and other particulates from worksites. As a result, you could end up polluting and destroying the local environment.
Construction managers should work with a team of qualified consultants to create a proper stormwater pollution prevention plan (SWPPP). These plans erect proper structures and practices to reduce the spread of sediment and erosion from stormwater to eliminate any threats of flooding or pollution around a surrounding work zone.
Not only is environmental safety intrinsically important to the surrounding community, but the law requires it.
- Regulatory Compliance
Financial complications from environmental liabilities and improper BMPs can be a severe headache for your work zone and derail projects. Fortunately, by working with qualified consultants, you can implement BMPs in your worksite that make it compliant with all environmental and worker regulations.
In addition, it certainly pays to have an excellent legal team on your side to guide you through contracts and set up proper insurance to reduce your construction site’s liability in the event of an accident. Legal counsel will help you avoid financial and legal risks.
- Financial Risk
Anything that threatens to stretch your budget or cause financial headaches is a source of financial risk. Some examples include:
- Changing cost of supplies
- Waste disposal
- Subcontractor disputes
- Reduced source of cash flow
- The need for additional labor or equipment
- Financial liabilities from high-risk areas
By incorporating contingency plans into your financial calculations, you can pay for problems as they occur, such as purchasing new equipment or finding new labor.
- Meeting Schedule
Finally, proper workflow practices should be in place to ensure smooth efficiency and that project deadline are met. Failing to do so could put your projects in peril financially.
This is where risk management software becomes so vital. By tracking progress as it occurs, managers can optimize to improve operational efficiency and determine whether or not projects are on schedule.
In total, by identifying risks ahead, such as financial and environmental complications, construction managers will avoid scheduling delays and satisfy their clients.
2. Assess Damage
Now that you’ve identified critical risk areas, you need to outline how costly each risk poses to your worksite. One way to accomplish this is through a risk assessment matrix, which is a chart that tracks how likely a risk is bound to occur and how expensive it would be to solve.
For example, stormwater runoff and sediment pollution may be somewhat likely to occur if your work zone has poor grading but is incredibly expensive to solve. For this reason, you would consider implementing proactive practices and procedures to eliminate this risk entirely, such as installing a silt fence around work zones.
3. Assign Responsibility and Action
The next critical area of construction risk management is planning to reduce risk. First, risk management tasks and responsibilities should be assigned to relevant team members, such as the construction manager, project owner, or site foreman.
Next contingency plans should be put in place to act on risk. This plan includes incorporating high-risk areas into the budget, such as the need for additional equipment.
Similarly, an appropriate risk management plan should prioritize risk mitigation solutions, such as installing a silt fence to remove ground sediment or providing crew workers with proper safety gear.
4. Monitor Ongoing Risks
Once critical areas have been identified, construction managers should actively track and monitor potential risk areas to respond accordingly.
Again, risks identified as highly likely by your risk assessment matrix should take priority, although it pays to track all areas of risk.
This process should include active budget tracking or checking the weather to ensure no storms will delay progress or threaten to wash away improperly stored hazard materials.
5. Report Risk Assessment
Finally, managers should share a risk management plan with business owners and all relevant stakeholders once created.
This plan allows site owners and stakeholders to create a budget and plan for risks as they occur. This plan will ensure a safe and smooth operation that satisfies all parties and keeps your construction zone safe.
Active construction risk management helps projects stay on budget, reduce liability, and prevent dangerous accidents from threatening the health of your workers and the surrounding environment.
By identifying, tracking, and acting on risk, you can ensure your operation will run more efficiently and accident-free.
Additionally, proper construction risk management should be continually monitored, discussed, and updated to ensure that BMPs are continuously updated and legally compliant.