When it comes to managing risk, about a third of general contractors and trade contractors say they lack knowledge about risk reduction strategies. Meanwhile, more than half of GCs and two-thirds of the trades said the increasing tendency for owners to shift risk to them was causing them to look more aggressively at risk mitigation strategies. Here are the most effective risk mitigation strategies and ways to use them to reduce your total project risk.
Meet With Everyone, More Than Once
This tops the list of the most effective risk management strategies, and it’s backed up by many other studies. When you hold these meetings regularly to focus exclusively on risk, you are capturing the benefit of intense collaboration.
Owners, general contractors and trade contractors named these eight benefits of holding regular meetings with risk as the top agenda item:
- More reliable project performance.
- Identify better solutions that don’t sidetrack the original project goals.
- Better scheduling.
- Less rework.
- Improved safety.
- Lower cost.
- Greater innovation.
- Happier clients.
Project participants rate the benefits at different intensities based on their roles. General contractors and subcontractors saw the greatest benefits in project performance, scheduling, safety, and cost.
Plan to Manage Risk
When you develop a risk management plan, you’re stepping into a very creative process. There are numerous ways for you to deal with the risk posed by any event or condition. Figuring out how to avoid, mitigate, transfer or accept risks requires you to think outside the box.
Begin planning by naming your project risks. They fall into many categories from technical to schedule to weather, and even political and environmental. The simplest thing is to make a list by brainstorming, and reviewing risks you’ve faced in the past. Be sure to analyze from the perspective of the type of project, the participants and the geography because those introduce unique risks.
The simplest thing is to make a list by brainstorming, and reviewing risks you’ve faced in the past.
Next, you need to list your risks in the order of priority. In most cases, safety risks, for instance, would have higher priority than schedule risks. You’re trying to rank order the risks based on the project type, the stakeholders, the geography, and their effects on the project.
Then, it’s a matter of planning how to deal with them. In some cases, you’ll avoid them by changing the schedule, redoing estimates or setting up processes so you completely avoid the risk. At other times, you’ll want to mitigate them by reducing the possibility they’ll affect the project. An example of this is installing railings around stairwell openings. You aren’t going to totally remove the risk of someone falling down the stairs but you are hoping to lower the possibility of that happening.
There are some risks you can’t avoid or mitigate and, in those cases, you will try to transfer them. You can do that by buying insurance or using contract clauses that assign risk to other parties. Finally, there are the risks you accept. Those are the risks that are far from becoming reality, like a hurricane in Wisconsin, or a third party event that is highly unlikely.
Set Up Special Risk Teams
Not every project needs these, but on projects with higher than normal safety risks, or ones where project performance has too many variables, special teams are valued by owners, general contractors and subcontractors.
There are greater safety risks whenever you’re using many new or hazardous materials. Projects within geographies affected by natural catastrophes are are also the case. Even the time of year can push a project into one with greater safety risks.
Project performance issues can arise in greater quantity on projects with participants who aren’t familiar with the project delivery method. Complex projects with large numbers of participants have greater potential performance issues because they stretch everyone’s abilities. Setting up special teams focusing on specific project risks that that are most likely to derail the schedule is a proven tactic. Whenever you mitigate or accept risks, the door is still open for the risks to impact the project.
Identify Your Contingencies
Whenever you mitigate or accept risks, the door is still open for the risks to affect the project. You’ve already listed risks by priority which should eliminate all the ones you might face. For all the others, it’s golden to have a contingency plan, if they come to life.
The contingency plan usually includes funds to deal with the risk if it comes to pass. The higher the risks to the project, the greater the funds. It’s not unusual to assign contingency funds to line items in the budget and to have them managed by the person responsible for the line items. This can, however, lead to contingency getting spent on problems other than the designated risks. To control this, you can place the contingency funds into the project budget.
Track Your Risk Across Projects
Hindsight is 20/20 especially when it comes to risk events that have already happened. But, you benefit from that hindsight just as much when you know how much risk you have successfully dealt with across multiple projects. This information is another example of data you can use to reduce risk and verify the methods used to do that.
If you see you are using a risk mitigation strategy across multiple projects and it’s not working, you’ve got ample evidence that something needs to be done to change the outcomes. On the other hand, if you see a strategy that consistently works, you can save yourself some time by building it into your risk plan — at least until you discover it’s no longer working.
Managing risk on construction projects would be a piece of cake if you had a working crystal ball. Until you’ve gotten one of those, take a lesson from owners, GCs and subs who’ve shared their experiences. Make these lessons a part of your risk strategy.