Risk management strategies for construction projects
Each building project has its unique mix of hazards and challenges. Unidentified hazards can fatally affect the bottom line, as all construction companies know. This is why every project must include construction risk management.
Construction-related risks can be quickly identified and managed with proper planning and execution. In this article, we will discuss the business owner in the construction industry who need help in creating an efficient construction risk management plan.
What is construction risk management?
Construction risk management is determining the hazards associated with a project and assessing approaches or steps to lessen their impact. The entire process entails meticulous preparation, observation, and management of numerous potential risk situations.
A plan or document outlining the risks and the steps to address them is the foundation of construction risk management. Early on in the planning process for building, this blueprint is prepared.
Taxonomy of Risk
Risk can be categorized by their locus of action, that is, the organizational level at which the risk will have the most impact.
Project risks
Those risks within the project boundary could affect the delivery of the business outcome that the project is set up to deliver.
Business risks
Those risks affect the operation of the business outcome once the project has been delivered it.
Environmental risks
Those risks are external to the project environment but can affect the project objectives.
External change risks
Those risks are beyond the immediate project environment and could have a significant impact. Frequently in contractual terms, these may include exceptional, unforeseen events or circumstances that are beyond the reasonable control of the parties to a contract). However, external change risks go beyond force majeure, for example, because of a shift in government policy or its interpretation of a law.
Risk Management Strategies
Identification
A crucial step in the risk management process is identification, which lays the groundwork for the subsequent stages.
Context and Perspective for analysis
The project's scope, objectives, and business strategy must be clearly defined before identification. At this point, it's crucial to lay out the risk approach. This will depend on the nature and difficulty of the project (in terms of the number of stakeholders, dependencies, and products, its length, timescales, budget, and so on).
Mitigation
Once the identified risks have been prioritized and their timing has been established, possible management actions should be considered. These management actions are designed to contain the risk, by either making them less likely or by reducing their impact.
Report progress
Monitor and report on the change of status of any risk. The precise method and frequency of reporting depend on the risk strategy for the project that was developed during inception. The project manager is responsible for reporting progress to the project team. Risk owners are responsible for monitoring and reporting 'their' risks to the project manager.
These were the risk management strategies for construction projects. Hope this guide helps you to manage the risk you are facing in the current project.
