Construction Risk Management: An Introduction


Few things are as risky as construction projects. There is heavy equipment, crews working in precarious situations and complicated logistics, safety hazards and risk factors to manage. How do you meet your deadline while managing all that risk?

The answer is construction risk management. It can be mind-bogglingly complex, which is why you should make a detailed construction risk management plan. Let’s take a look at the basics, what a construction project manager is responsible for, types of risk in construction projects and how to deliver a successful project.

What Is Construction Risk Management?

Construction risk management is the process of evaluating and implementing procedures to reduce the impact of risks in construction projects. This risk management process involves thorough planning to create a risk management plan that allows project managers to identify, monitor and mitigate risks as they arise.

Project management software like ProjectManager makes the risk management process much easier. Make a risk management plan with a fully-featured Gantt chart, then track your projects with real-time dashboards and reports. Try it free today.

Project management spreadsheet for managing construction risks
Manage construction risks in real time with ProjectManager’s planning and tracking features. Learn more

A construction risk management plan is developed in the early stages of the construction planning process. It details what project risks might occur and the risk response to resolve them. This includes designating someone on the crew to own the issue and address it.

What Are the Types of Risk in Construction Projects?

In general, risk is anything that will delay the project or create further costs. There are many sources of risk on a construction site. To create a better risk management plan, it’s essential to know what risks there are, and where they will occur:

  • Safety Risk: Your crew is your most valuable resource. Nothing can be done without them. They are also subject to safety hazards, as many of the tasks assigned to them can be dangerous. While your crew is skilled and experienced, accidents can happen. Know the safety risks to your crew, what hazards they might fall prey to and create a safety plan to ensure employee safety.
  • Financial Risk: Without money, nothing happens. No one gets paid, you can’t rent equipment—you get the idea. That’s why any factors that can interrupt your cash flow need to be identified. This can include a cost increase for materials, competition in the market and so on. The more you understand the financial risk, the more likely you’ll stay within budget.
  • Legal Risk: Managing a construction project involves more than the constraints of time, cost and scope. There are legal constraints, such as regulations, code violations and contract terms disputes with your clients, vendors and subcontractors. Any of these things can send your construction project off track.
  • Project Risk: Project risks are universal project management risks associated with managing any project. These include poor management of the resources, missing deadlines and falling behind schedule. The construction project manager must be thorough and aware of difficulties that can throw the project off track.
  • Environmental Risk: AKA an “act of God,” such as floods, earthquakes and other kinds of natural disasters. Anything nature unexpectedly unleashes that makes the construction site inaccessible is costly and potentially destructive for a construction project.

Related: 8 Free Construction Project Management Excel Templates

The Construction Risk Management Process

The process of mitigating risk for a construction project is no different than any other project. The only difference is the type of risks you’re managing in the construction industry. Here are the five steps of the risk management process.

  1. Identification: First, make a list of every possible issue that could arise. Do the research, talk to your crew and explore historical data from past construction projects that are similar to yours. While this identification list is always open for edits and updates, you should have a set deadline so that you don’t get bogged down in analysis.
  2. Assessment: Not all risks are equal. Some are more likely to occur, others less so. One way to assess your list of risks is to use a risk assessment matrix, which charts the likelihood of each risk and the size of the impact it can have on your project. Creating a risk assessment matrix helps you when addressing the risk, if it appears.
  3. Mitigation: This is where you implement a contingency plan that will reduce the likelihood and impact of the risks you identified earlier. The top priority, of course, is those you defined as highly likely and having the greatest impact. These should be given an owner, who will be responsible for identifying the risk (if it occurs) and managing its resolution.
  4. Monitoring: This step is always ongoing, as you attempt to identify these risks when they show up. That includes monitoring the effectiveness of your mitigation plan. Also, stakeholders should be consulted and kept updated on these project risks. Engage other department leaders to help, and empower the team to respond to risk. Have them note if a risk has moved to a different spot on your risk assessment matrix.
  5. Reporting: Your construction risk management plan should be analyzed and shared with the crew and stakeholders. These reports on risk mitigation allow you to evaluate the effectiveness of the contingency plan. While this can be done with an Excel spreadsheet, using project management software is more efficient. Online tools gather the data automatically, create dashboards to illustrate progress and even generate reports that are easily distributed.

What You Should Avoid

There are risks throughout the life of a construction project. You need to know how to identify the risk as it shows up and address it quickly with the appropriate risk response. An area to keep an eye on is the design process. Errors or omissions there can come back to bite you during execution.

There are also external risks, like dealing with new stakeholders and their change requests. Those can wreak havoc on your construction risk management plan. Laws and local standards can change once you break ground, and the environmental analysis could be incomplete.

You also need to keep an eye on the crew. Make sure you hire experienced professionals and offer them safety training because an inexperienced workforce is asking for risk. So is poor morale, which can lead to staff turnover or conflict. Don’t forget to make sure permits are updated and that there are no contradictions in your construction documents. These are just a few of the many factors to account for when managing your construction risk management plan.

How ProjectManager Can Help You Mitigate Risk

Construction risk management involves a lot of monitoring and tracking. To properly control risk, you need construction project management software that provides real-time insights into your progress. ProjectManager is a cloud-based tool that delivers real-time data for effective construction risk management.

Manage Projects on Gantt Charts

Collecting all the risks and prioritizing them can be difficult. Using ProjectManager’s interactive Gantt chart, you can organize all the risks and assign them an owner and resources. Once the risk is an issue, your can create a task to address it, attach files to those tasks and leave comments for your team. That allows crews to collaborate, whether they’re in the office or in the construction site.

Project management training video (kki7zez71n)

Multiple Project Views

Of course, not everyone likes using a Gantt. Your crew might prefer a task list or project calendar that captures important dates. That’s why ProjectManager offers multiple project views, so everyone can use what they want to use. Changes to tasks in one view are reflected in all the rest.

ProjectManager's list view

Track Progress on Dashboards

Unlike other software, our real-time dashboard doesn’t have to be configured. Graphs and charts show metrics such as time, tasks and workload so you can see an issue fast and respond quickly. We also have one-click reports that can be shared to update stakeholders. We have all sides of your construction risk management plan covered.

ProjectManager’s dashboard view, which shows six key metrics on a project

ProjectManager is an award-winning tool that helps organize construction projects, from planning risk to monitoring and reporting to stakeholders. Build on a collaborative platform that connects your crew to help them work better together. Try ProjectManager free today!

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