Risk management strategies in contracting projects,
Most projects and operations involve risks and factors that require careful consideration, to help construction teams respond to challenges, prevent injury to employees, and ensure projects remain on schedule.
They often use risk management plans. If you work in the construction industry, you may benefit from knowing the common risks faced by construction projects and how to plan for them.
In this article, we discuss what a risk management plan is, list its main benefits and explain how to create a risk management plan for a construction project.
What is the risk management plan?
A risk management plan is a system that individuals or companies create to help them mitigate and manage potential risks during a project.
People often write the plan as a document that they can refer to for the duration of the project if a problem or challenge arises.
Although risk management plans are used by businesses and corporations for a variety of fields and industries, they appear most frequently on construction projects.
For example, if a construction crew runs out of materials for part of their project, the construction manager can refer to the risk management plan to help them find a quick and effective solution.
How to create a construction risk management plan
Here is a list of steps to help you create a solid risk management plan for a construction project:
Identify the main risks
Start the project plan by identifying key risks during the pre-construction phase of the project to begin mitigating challenges immediately.
When identifying key risks, talk to other team members, such as construction crews, executives, and clients.
Because they can bring different experiences and perspectives to find certain risks that you can’t see.
Throughout the course of the project, you also continue to hold meetings with team members and stakeholders to identify any new risks that may have presented themselves.
Also consider specific risks that are unique to a particular project or area, for example, if you are building a structure or building on a hillside,
You can check how often the earth is exposed to earthquakes.
Once you have a solid understanding of the risks, make a list that you can continue to use throughout the project.
Risk prioritization
After you’ve identified the risks, work on prioritizing them so you can tackle any major problems right away. When classifying risks,
Using two heuristics can help you prioritize them more efficiently.
These guidelines include:
The potential impact of the risk on the project or business.
The potential for actual hazards to occur during the construction project.
For example, if you know there is a risk that the project area might experience a hurricane or tropical storm,
The effect of this risk may be very large, but the probability may be low or almost non-existent. After sorting the risks according to priority,
It is important to know what risks you can immediately remove or mitigate.
For example, if there is a risk of material prices increasing during construction, see if you can develop a contract with a vendor that completely eliminates the risk.
Develop a response strategy
Developing a strategy in response to any risks that you cannot immediately correct can help you respond to risks more efficiently.
When companies identify a risk, there are generally four ways they respond to it, including:
Risk Reduction: Risk Reduction occurs when a company does everything
it can to mitigate risk and ensure that nothing goes wrong.
For example, if a company wants to avoid injury on a construction site,
it may spend additional time and resources training its staff.
Risk Transfer: Companies transfer risk when they don’t want to be responsible for solving problems or challenges they may present.
Although companies are sometimes expensive,
they can pay more for insurance or create a contract that makes subcontractors
responsible for responding to any risks.
Risk Avoidance: Risk avoidance, by changing the project design or location,
is often the first thing companies and companies try to achieve because it can save them the most time and money.
It is sometimes necessary for companies to perform a cost-risk analysis,
because changing or moving a project entirely could cost them more in the end.
Risk Acceptance: If the Company has exhausted all other options,
it may act to accept risks that remain beyond its control.
For example, if there is a risk that material prices will increase and the company is unable to
prevent the risk,
They can try to save money in other areas of the project to better prepare their budget.
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