There is a high level of risk involved in construction projects that cannot be overlooked. Your construction firm might face various risks that might have a detrimental impact on your projects and even ruin your bottom lines. According to The Strait Times, in Singapore, the construction sector accounts for the biggest number of occupational fatalities and serious injuries in the first half of 2022, with 10 fatalities and 84 cases of major injuries.
However, construction firms can definitely manage these dangers! Construction risk management is essential to avoid unintended outcomes and get a successful result. This article encompasses all aspects of construction risk management and the optimised risk management process. Stay tuned until the end of the article to learn the best way to manage construction risks!
1. What is Construction Risk Management?
Construction risk is the possibility of experiencing any kind of loss while a project is being built. The majority of building projects are complicated, which brings various risks. Particularly, legal, financial, environmental, safety, and productivity risks are some of the main issues that construction companies must cope with.
In general, construction risk management is the process of identifying, assessing, and managing the risks associated with construction projects to reduce those risks’ potential for having a negative impact on the whole project.
2. The Construction Risk Management Process
2.1. Identifying the Risks
Finding all of the risks that can emerge throughout the construction process is the first step. In this step, you understand the sort of risk you are dealing with and the elements contributing to it before drawing up a detailed plan to manage it. If the underlying causes are identified, finding a thorough solution to the issue is made much simpler.
2.2. Assessing the Risks
If your construction project is exposed to more than one risk, you must ascertain the consequences of each risk as well as the likelihood that it will happen. Therefore, mark the risks that need to be addressed immediately and are most crucial to the project’s success. Construction risk management may run more smoothly if hazards are prioritised according to significance.
Besides, a number of risks might make it challenging to monitor the progress of your project work. With Synergix Project Costing Management module, you can guarantee clear insight into the status of your project and your financial data in real-time. The two features – Budget Estimation/Control and Auto-Computation of Estimated Project Profitability will prevent under- or overbidding and ensure that the project cost does not exceed. In addition, Synergix ERP system can promptly alert you about financial threats by providing a clear and thorough view of your resource capacity.
2.3. Determining the Risk Response Strategies
There are four primary construction risk management tactics that construction sectors can use to develop a pre-emptive reaction strategy for each risk. As follows:
- Avoid. Construction companies can avoid risk on their projects by changing their scope of work or adopting selective project bidding strategies.
- Transfer. This strategy entails asking a third party to take on the liability connected with particular risks.
- Mitigate. Mitigation is the most proactive method accessible to construction companies since it entails developing strategies or processes that eliminate the risk.
- Accept. If all else fails, contractors may be required to accept specific risks as project operational necessities.
2.4. Implementing the Risk Response Strategies
The implementation of the previously decided strategies is a crucial element in the construction risk management process. No matter how well-thought-out your plan is, it will be useless if you do not carry it through as intended. Other than your operations team – the developed risk management plan, and your leadership, there are other factors that might support your practice, including management software and financial consultancy.
Enterprise Resource Planning (ERP) software enables you to have a thorough understanding of how your business operates. By providing internal controls and granting access privileges to only authorised personnel, it aids in risk management and shields businesses from internal and external theft and fraud.
Because of construction risks’ frequent occurrence and the severe consequences it causes, construction risk management is a must-have for any company. In the modern construction industry, some of the current phenomena are increasing costs, more complex projects, and increased safety concerns. Therefore, having the proper software to safeguard a firm from risk management is more important than ever.
Synergix ERP software, with project costing management, contract management, financial management, and other aspects of a construction business, is the perfect tool for construction enterprises. It reduces risk by making activities easier to handle and be more quickly processed. Hence, should you have any interest in Construction ERP solution, do not hesitate to contact our experts!