As a construction company grows and handles increasing numbers of projects simultaneously, it may be beneficial to use a software application specifically designed to help you manage risk ERM or enterprise risk management software.
At an intermediate level, certain project management software options also have risk management functionality built in. On-the-job training in the use of specific materials and machines is one example and online training for work safety is another. Construction business credit lines , whether you use them or not, are often a good precaution. The right accounting software can make it easy to prepare documents that your bank will require before opening up a line of credit.
An insurance broker or company should be able to advise you about local authority requirements for construction insurance, and the ins and outs of CCIP contractor controlled insurance programs , and SDI subcontractor default insurance. Remember, however, that some construction risk will always be uninsurable. Professional advice. Sources of advice for construction businesses include legal firms specializing in construction contracts and litigation, bankers and accountancy firms, consultants, and business friends.
Another source, sometimes overlooked, is organizations that issue surety bonds. This bond protects clients by guaranteeing that their building project will be finished, whatever might happen to your construction company.
New technology and methods. Some risks that were automatically accepted before can now be mitigated or even eliminated with new approaches. Bad weather is one example. With the use of prefabricated building modules, building construction time on site can be significantly reduced and with it, the possible impact of bad weather. In other areas, the use of drones unmanned aerial vehicles can save time and reduce safety hazards.
Building information modeling BIM is also a means of identifying and dealing with risk before it becomes reality. Looking for Construction Management software? Check out Capterra's list of the best Construction Management software solutions. Tags: construction risk construction risk management contractor risk contractor risk management. About the Author. Rachel Burger Rachel is a former Capterra analyst who covered project management.
Comment Guidelines: All comments are moderated before publication and must meet our guidelines. Comments must be substantive, professional, and avoid self promotion. Moderators use discretion when approving comments. Your privacy is important to us. Check out our Privacy Policy. YES NO. Follow Us. Related Reading. Brainstorming is done with a group of people who focus on identification of risk for the project.
A team of experts is consulted anonymously. A list of required information is sent to experts, responses are compiled, and results are sent back to them for further review until a consensus is reached.
An interview is conducted with project participants, stakeholders, experts, etc to identify risks. Root causes are determined for the identified risks.
These root causes are further used to identify additional risks. Strengths and weaknesses are identified for the project and thus, risks are determined. The checklist of risk categories is used to come up with additional risks for the project. Identification of different assumptions of the project and determining their validity, further helps in identifying risks for the project. This process of Risk Identification results in creation of Risk Register. A Risk Register is a living document that is updated regularly throughout the life cycle of the project.
It becomes a part of project documents and is included in the historical records that are used for future projects. The risk register includes:. One typical template is given in Exhibit 2: The expressions in italics inside the square brackets need to be specified in order to describe any risk completely.
Exhibit 2: A typical Template for a fully specified risk statement. People, naturally, do not think in terms of fully specified risk-statements: when you ask for potential risks, you will initially obtain a mixture of.
This is not initially a problem once you understand how to use the various tools in order to elaborate, progressively, the complete list of fully specified risk statements. Positive risks are generally known as opportunities , negative risks as threats. In the identification process, you need to identify and specify all of these potential threats and opportunities.
The paper will follow describe each phase of the risk identification lifecycle in turn, with its tools and techniques. In order to explain each of the risk identification concepts and the use of the corresponding tool, these will be applied to the Sample Project defined below see Exhibit 3. Additional details and constraints relative to this project will then become apparent as the risk identification process progresses. The first two SW correspond to internal capacities of the organisation, whereas the last two OT refer to factors impacting or impacted by the external environment.
For the Sample project ,. The approach is to learn from previous experience see also Pritchard In this case it is very important to select a project or set of projects that are really similar to the current one. For the Sample project , when we came up against one of these competitors before, we lost the bid because of their political lobbying. The risks identified in the first step will serve as a trigger the thinking in more depth. In order to obtain the best results from an interview, it should be run as a project in its own right: define the objectives and desired outcome.
Select the correct people and brief them interviewers and interviewees. Allocate time and resources. Develop relevant questions. For more details, see Pritchard For the Sample project , they decided to interview their Chief Financial Officer to identify the financial risks in the case of winning the bid, losing the bid and choosing not to bid. A number of project decisions are based on conscious or unconscious assumptions. Since each assumption could be wrong, each is a potential risk.
One challenge in assumptions analysis is to try to make the unconscious assumptions visible. For the Sample project , one assumption is that the customer does in fact want to buy the product or service described in the RFP.
This could be false they may have decided to create it themselves and are just looking for additional information or justification for this.
This is clearly a threat. All of the project documents provide details that can indicate areas of risk.
Some risks may come from faulty project process, whereas others may be inherent in the project approach or constraints. For the Sample Project , the RFP states that in case of satisfactory delivery by the chosen contractor, the contractor may be requested to provide ongoing support and operations for the service. This is an opportunity to be considered. This technique is especially useful when the views of a large number of distributed people are required.
A document is sent to each participant explaining the situation and asking a specific question or set of questions. Affinity Diagrams. The affinity diagram is a business tool used to organize ideas and data. The tool is commonly used within project management and allows large numbers of ideas to be sorted into groups for review and analysis.
The affinity diagram was devised by Jiro Kawakita in the s and is sometimes referred to as the KJ Method. These diagrams work best when sound brainstorming processes are followed. Risk Breakdown Structures. The Risk Breakdown Structures RBS is a hierarchically organized depiction of identified project risks arranged by risk category and subcategory that identifies the various areas and causes of potential risks.
An example is shown below:.
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