What are the top strategies for managing risk in construction?

1 Identify and assess risks

The first step in managing risk is to identify and assess the potential sources and impacts of risk in the project. This can be done by using various tools and techniques, such as brainstorming, checklists, surveys, interviews, historical data, risk registers, and risk matrices. The risk identification and assessment process should involve all the relevant parties, such as the project team, the client, the subcontractors, the suppliers, and the regulators. The risk assessment should also consider the probability and severity of each risk, as well as the interdependencies and correlations among them.

2 Plan and implement risk responses

The second step in managing risk is to plan and implement the appropriate risk responses, based on the risk assessment results. The risk responses can be classified into four categories: avoid, transfer, mitigate, or accept. Avoiding risk means eliminating or reducing the exposure to the risk source, such as changing the design, scope, schedule, or location of the project. Transferring risk means shifting the responsibility or liability for the risk to another party, such as through insurance, contracts, or warranties. Mitigating risk means taking actions to reduce the likelihood or impact of the risk, such as implementing quality control, safety measures, contingency plans, or backup resources. Accepting risk means acknowledging and absorbing the risk, either because it is unavoidable, insignificant, or beneficial.

3 Monitor and control risks

The third step in managing risk is to monitor and control the risks throughout the project lifecycle, by using various methods and metrics, such as risk audits, reviews, reports, dashboards, indicators, and triggers. The purpose of monitoring and controlling risks is to track the performance and progress of the risk responses, to identify any new or emerging risks, to evaluate the effectiveness and efficiency of the risk management process, and to make any necessary adjustments or improvements. Monitoring and controlling risks also involves communicating and documenting the risk information and actions, as well as escalating and resolving any issues or conflicts.

4 Learn and improve from risks

The fourth step in managing risk is to learn and improve from the risks and their outcomes, by using various tools and techniques, such as lessons learned, feedback, surveys, evaluations, and benchmarks. The goal of learning and improving from risks is to capture and share the knowledge and experience gained from the project, to identify the strengths and weaknesses of the risk management process, to recognize the best practices and lessons learned, and to apply them to future projects or operations. Learning and improving from risks also helps to enhance the skills and competencies of the project team and the organization, as well as to foster a culture of risk awareness and innovation.

5 Align and integrate risks

The fifth step in managing risk is to align and integrate the risks and their management with the overall objectives and strategies of the project and the organization, by using various frameworks and standards, such as ISO 31000, PMBOK, COSO, or IRM. The aim of aligning and integrating risks is to ensure that the risk management process is consistent, coherent, and comprehensive, and that it supports and adds value to the project and the organization. Aligning and integrating risks also involves aligning the expectations and interests of the various stakeholders, such as the project team, the client, the subcontractors, the suppliers, the regulators, and the public.

6 Cultivate and empower risk leaders

The sixth step in managing risk is to cultivate and empower the risk leaders, who are the individuals or groups who have the authority, responsibility, and accountability for the risk management process, such as the project manager, the risk manager, the risk committee, or the risk champion. The role of the risk leaders is to establish and implement the risk management policy, plan, and procedures, to coordinate and oversee the risk management activities, to communicate and report the risk information and actions, and to motivate and inspire the risk culture and behavior. Cultivating and empowering risk leaders also involves providing them with the necessary resources, tools, training, and support, as well as rewarding and recognizing their achievements and contributions.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?