Even the best-planned construction projects bear an element of uncertainty. It’s this concept that drives the need for effective construction risk management to sail through unpredictable events. The risk management strategy ensures the project is completed on time, within the budgeted cost, and meets the desired quality standards.

Financial problems, legal issues, mismanagement, accidents, and natural calamities, pose risks to construction projects. Let’s look at the major constituents of risk management strategies and how you can prepare against unforeseen events.

Preparing for the Unexpected: Risk Management in Construction Projects

#1 Identification of the Risk

The first step to effective risk management is the identification of potential project risks. This step involves a close examination of each project stage from initiation to its completion, covering every phase and component.

Key Areas to Consider

  • Project Scope – Any change in the scope of a project has the potential to increase the budget and throw the timeline schedule of course.
  • Site Conditions – Soil problems and underground utilities pose risks to infrastructure and public health and safety during excavation.
  • Resources – The project timeline is significantly slowed if there are insufficient materials, manpower, and equipment.
  • Compliance with Regulations – Changes in the regulatory environment such as the issuing of new laws modifications to existing laws, or changes in the building code, influence project planning and costs.
  • Weather – Bad weather conditions can slow project progress and damage materials or structures.

#2 Risk Assessment

After identifying the potential risks to the project, the next step is assessing the likelihood and impact of these risks occurring and the effect they have. Project managers must carefully evaluate and quantify the probability and consequences of the risks.

Assessment Techniques

  • Qualitative Analysis – Risk is categorized per its probable chance of happening and its impact. Project managers use a simple matrix for prioritizing risks.
  • Quantitative Analysis – This technique assigns numerical values to risks by utilizing statistical methods for estimating potential impact on the project schedule or project costs.

Step #3 Risk Prioritization

Prioritize risks by potential impact and likelihood, by keeping their context in view. Pay attention to risks with the biggest potential to negatively impact the project.

Priority Criteria

  • Severity – What is the potential extent of damage or disruption to the project if these types of risks occur?
  • Probability – How likely is it that the uncertainty occurs?
  • Controllability – What is the management team’s ability to reduce or control the risk?

Step #4 Strategies for Managing Risk

Mitigation strategies are highly effective in managing risk. These strategies are designed to identify individual risks and lessen the likelihood of them occurring and dampen the impact they have on the project.

Risk Mitigation

  • Avoidance – This means altering the original scope and plans of a project to ensure that the risk doesn’t occur.
  • Reduction – Taking action to reduce the probability or severity of the risk, such as increased safety controls or employee training workshops.
  • Assignment – A strategy that shifts the transfer of risk to an insurance carrier or subcontractor, removing potential liability from the management team if risks occur.
  • Acceptance – Accepting risk by acknowledging it and preparing contingency measures for dealing with the risk event if it occurs.

Step #5 Implementing Risk Management Plans

Once the risk management strategy is in place, the next phase is implementation. Execution involves underpinning the risk management strategy in every phase of the project. This approach ensures everybody involved has an understanding of the role they’re expected to play.

Key Actions

  • Communicate – Keep all stakeholders aware of risks and mitigation processes regularly. Update the risk management strategy as you move through the project – it’s flexible and dynamic, coping with unforeseen risks as they occur.
  • Training – Organize training briefings to make team members aware of the risk management plan and how to address possible issues when they occur.
  • Changes in Risks – Regularly review the risk management strategy to accommodate changes.

Step #6 Periodic Review and Revision

As mentioned, risk management is a continuous process. Review your risk management strategy as frequently as possible and update it for changes in the project or external environment.

Review Activities

  • Risk Audits – Periodic audits confirm that the specified risk methods/safeguards are effective.
  • Progress Meetings – Hold regular meetings with your team to discuss emerging risks and risk mitigation strategies.
  • Documentation – Record the outcomes of your progress meetings and data on the risks your team identifies, risk assessments, and mitigation strategies. Archive them for future project reviews.

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PSC Construction in Omaha provides a full range of services, performed according to your specifications. Regardless of the complexity of the project, the scope, or the timeline, PSC Construction ensures you have the foundation you need to safely and successfully move forward. Contact PSC Construction today to see why we’re one of the most trusted resources for location mapping and hydro-excavation, underground utilities, site development and preparation, and excavation in Omaha.