What is the Purpose of Risk Management in Construction? And what steps are involved?

We all want to do our jobs well. Full stop. Quality, accuracy and efficiency are our top priorities that we consider every day. But in the construction industry we need to consider the inherent risks of each individual project before those risks become real. ?

Construction is risky for a number of complex reasons. From a client/developer high end perspective, there are immense pressures to produce high returns on investment, save time and money, and ensure health and safety. From a project delivery team perspective (designers, Project Managers, Quantity Surveyors and other disciplines) the list of practical risks can be long, dependent upon each project type and location whilst also tasked with ensuring their clients high end risks are managed. ?

Why Do You Need Risk Management? ?

This is why risk management is key and essential. An often stated – but rarely clearly defined process – risk management in construction revolves around predicting, monitoring, and controlling our exposure to possible risks with the intention of preventing them. Sounds simple enough, right??

Think again.?

Faced with the seismic challenges of our industry, construction projects have a tendency to ignore risks or deal with them in an arbitrary way. Indeed, it is common practice to simply add a 10% contingency to handle risk. ?

However, it is often the risks which we do not make provisions for that bite us in the proverbial. What this means is that effective risk management must take steps to prevent the potential issues and losses caused by those identified risks, such as accidents, loss of money or time, damage to equipment or reputational damage. ?

Here Is How To Achieve It?

Fortunately, risk management can be simple. That is, if you give it some thought. ?

1. The first step is to produce a risk assessment. This involves identifying potential risks, assessing their possibility and consequences, and then prioritising which ones to focus on. Always think - what have I missed??
2. Risks are greatest in the earliest stages of a project, so start here. Any robust design process should allocate time and consideration to project risks from inception. Look at procurement routes and explore the possibilities of client-led design, which puts the burden of risk on the client or contractor finance, which shifts risk onto contractors through design and construction. The choice is yours. ?
3. Then it is time to get granular. Explore client risks, especially those around cost and time, contractor hazards in price and time scale and, of course, don't forget health and safety.

To find out more give us a call. MDA Australia offers tailored consultancy, which can improve and refine commercial strategy all the way through to managing construction projects.?