The Need for Risk Management Strategies in Construction
There will always be an element of risk in any type of business venture; that’s just a fact of life. Unfortunately, the construction industry is certainly no exception to that rule. So on a precautionary note, the importance of focusing on risk management cannot be overstated. Therefore, you want to review contract documents at the start of every new construction project. It also makes sense to allocate risk management responsibility to those individuals who are the most capable and qualified for the task. This will enable you to minimize project risk and the costs associated with it. And that will ensure that you get maximum safety and that helps grow the business.
Step #1: Allocate the risk involved
One of the aspects risk management in construction projects is working with individuals and anticipating the potential risks involved during contract negotiations. By doing that, you’ll be able to delegate those responsibilities to those individuals that are qualified to handle them. Should such a scenario arise, the contractor would be the ideal choice for handling performance and personnel issues. On the other hand, the owner would best be suited for managing design flaws, the environment, and placement.
Step #2: Protect yourself with an indemnity policy
It is best to manage any liability resulting from professional negligence that may arise during a project by having indemnity insurance coverage. If you want to proactively manage your risk before you fire up a new project, make sure that this coverage is current and up-to-date. Furthermore, you need to ensure it is in effect and meets the needs of your particular project. Make sure the policy covers you against latent defects, product liability, and product liability.
Step #3: Remember above all else that is “management”
First and foremost, it is important to recognize a cold, hard fact. No matter what, the management of construction risk is, as the name implies – MANAGEMENT. It in no way implies prevention. It is simple required in order to cope with the inevitable. There are 3 very important steps here, namely research, preparation, and assignment. This is the mantra of every successful contractor and owner.
You have to ensure that any factor that could potentially become a problem before the start of a project has been properly identified. You can do this by:
- Discussing your situation with crane experts and specialists
- Ensure that accompanying indemnity insurance has been properly assigned prior to finalizing contract negotiations
- Preparing a budget restriction proposal
You should also be aware of other forms of risk that can negatively impact your project. These are “feasibility” and “funding” risks. These are often referred to as “invisible” risk in the industry since you rarely know that they are there until a situation arises. Just keep in mind that careful preparation and due diligence can help you prevent them.
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