Demolishing anything involves managing risk—and while the spotlight recently has been on health and safety, particularly in relation to COVID-19; there are many other areas of the construction process where a good risk management approach can save you time, money and heartache.

Managing workplace health and safety risks is fundamental in construction, still many other kinds of risks can compromise projects, profits, and reputations. They don’t always receive as much attention because they don’t always seem as urgent

Whether it’s meeting the terms of a contract, maintaining employee safety on the job site, or dealing with natural disasters, every project has its own set of hazards. If not managed, these risks can hurt your construction projects and prove fatal to your bottom line.

What is Construction Risk Management?

Risk management is the process of determining the risks present in your business and evaluating the procedures to minimize their impact. In construction, the process involves planning, monitoring, and controlling instances of risk. As the center of the process is your risk management plan, a document that details the risks and your processes for addressing them.

Key elements to securing proper Risk Management plan

1- Managing the risks by applying the general principles of prevention

2- Appointing the right people and organizations at the right time

3- Making sure everyone has the information, instruction, training and supervision they need to carry out their jobs in a way that secures health and safety

4- Stakeholders cooperating and communicating with each other and coordinating their work; and consulting workers and engaging with them to promote and develop effective measures to secure health, safety and welfare.

How to Manage Risks

To effectively manage risk, you’ll need to develop a risk management plan. The process can be broken down into six major steps:

1. Identify the Risks

Now that you know some of the most common construction project risks, it’s time to identify those unique to your project. Risk identification should take place during the preconstruction phase of the project to allow for time to manage any potential risks before accepting them.

An effective way to analyze risks is to hold brainstorming sessions with your project team and stakeholders. The goal is to identify all the possible scenarios that could impact the project at hand. A brainstorm session will allow all teams to contribute their knowledge and expertise. Past projects can provide a helpful reference to understand size, scope, and location.

After the brainstorm, you will then want to hold regular meetings with your project team. This will not help review current risk plans, but also identify any additional risks that may occur over time.

2. Prioritize Risks in Order of Importance

Construction risks vary for each company — a risk that may affect another business might not be a concern for yours. After identifying your risks, it is important to prioritize them based on two factors: (1) the potential impact on your business and (2) the chance of that risk materializing. When possible, use numbers such as dollar amounts and percentages for risk analysis.

High-impact, high-probability risks should be handled first, while low-impact, low-probability risks should be addressed last. For example, a price increase in the materials for your project can hurt your margins, so it should be handled with medium priority. Natural disasters have high impact but have low probability. If a hired contractor is unable to fulfill their portion of the project, that risk is an example of one with high impact and high probability.

Creating a 3×3 priority grid like the one below will help you determine the risks most crucial for managing.

3. Determine Your Risk Response Strategy

Once you have evaluated the priority of the risks, you’ll want to select a response strategy for each hazard. While risks are complex, risk response techniques fall into four main categories:

1. Avoid the risk: If you feel unequipped to handle a major risk or do not have the right risk plan set in place, the safe option is to steer clear of the project or change the scope. For example, you may want to avoid building projects in areas prone to earthquakes.
2. Transfer the risk: While costly, this solution may ultimately be less costly than accepting the risk itself. For example, you could transfer the risk to your insurance provider or forge an agreement with a supplier or subcontractor to pass the responsibility.
3. Mitigate the risk: When you mitigate risk, you create plans to keep the risk as low as possible. You can train workers and supply proper safety equipment to lessen the dangers of safety risk, for example.
4. Accept the risk: There are times where you need to accept the risks to complete a project. For example, you may decide to accept the delays caused by weather but you plan to manage the project better to work around the problem.

Appointing the right organiZations and people at the right time

Construction risk management is not a siloed activity — it must require the contribution of the major players in your company. Updates on risk should be communicated at every level.

The three key players who participate in the construction process are the owner team, design team, and contractor teams. Since each team has its own set of practices and procedures, it is important to look into their processes and identify and eliminate risks wherever possible. The stakeholders also play an important role that can impact risks.

The types of information to monitor include cash flows, drawings and diagrams, schedules and cost information, inspections, project files and logs, contracts, and regulatory documents.

Risk Management in Demolition

Along with the actual demolition process, risk management should be seen as one of the most critical steps of a demolition project. The steps of identifying, assessing, controlling, and monitoring risks will make them work for your company.

Not all risks are negative. Positive risks come with accepting a second project from a customer, for example. By setting the right strategies and using the right resources in your management plan, your company will not only defend against any disasters but also take advantage of new business opportunities.

We are ECG, We are safety first. 

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Contact us to get started on your next project, Call us: 562-438-7999.