Construction Risk Management
It is extremely important to recognize and plan for the risks that are present during the construction process. Of course, every risk cannot be preconceived. However, during the process of risk management the contractor will attempt to identify as many of them as possible in the hopes of preventing them or, at the very least, being prepared from them when they do occur. What are some of these risks? Well, there are four major potential areas of loss which must be carefully considered during the risk management process. They are:
- Property: A hugely important part of any construction project is deciding which piece of land to utilize. The huge majority of this land will be privately owned, either by the client you’re doing work for or by a third party. Doing excessive or unnecessary damage to this area during the construction process could make the contractor liable for damages. Also, if you’re adding to or renovating an existing property doing damage to said property could likewise result in additional expenses.
- Personnel: It is every construction firm’s responsibility to make their work environment as safe as possible. However, to matter how hard one tries to maintain a safe work site, worker injuries will almost certainly occur occasionally. During the risk management process all of the potential expenses of these occurrences must be considered, including medical expenses, lost wages or, in more extreme cases, disability payments.
- Net Income: When working on a contracting project the needs of the clients are obviously the most important thing, and a good contractor will do everything they can to meet them. However, contractors must make sure that the budgetary promises they make to their clients are realistic. In other words, in order to stay in business the contractor must make a healthy profit on the project, and if the promised budget is too low in comparison to the costs the project accumulates that profit will not materialize. It is the contractor’s responsibility to make sure the project does not go over-budget.
- Liability: During the initial stages of the project the contractor will make various promises to the client: that the end product will look a certain way, that it will fulfill a specific purpose, that it will cost only so much money and so on. If these legally binding expectations are not met the contractor may be liable.
Being prepared for the unforeseen will save all parties valuable time and money in the long run. That’s why Logan Creek takes the risk management process so seriously.