What are the top strategies for managing risk in construction?
Construction projects involve various types of risks, such as cost overruns, delays, safety hazards, quality issues, environmental impacts, and legal disputes. Managing these risks effectively is crucial for the success of any project, as well as for the reputation and profitability of the contractors, clients, and stakeholders. In this article, we will explore some of the top strategies for managing risk in construction, based on the best practices of plant engineering.
The first step in managing risk is to identify and assess the potential sources and impacts of risk in the project. This can be done by using various tools and techniques, such as brainstorming, checklists, surveys, interviews, historical data, risk registers, and risk matrices. The risk identification and assessment process should involve all the relevant parties, such as the project team, the client, the subcontractors, the suppliers, and the regulators. The risk assessment should also consider the probability and severity of each risk, as well as the interdependencies and correlations among them.
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The foundation of issue mitigation is a comprehensive risk log created via group brainstorming. During organised workshops, collect input from all project stakeholders in order to map the interconnection of risks, assess the probability and effect levels, and assign ownership. In order to build focused prevention and contingency actions based on robust analysis, investigate historical data and engage subject matter experts when developing response plans for priority items. Keep an eye on early warning KPIs so that you can take predetermined action as necessary. A data-driven, inclusive cycle of discovery, assessment, and response reduces random variables by enforcing strict cross-functional governance amongst teams.
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To manage the risk especially in construction we need to identify and assess it's severity. Once this is done managing the risk become an easier task. Failure mostly happens because the risk involved wasn't identified or calculated/assessed properly before hand. Having a team dedicated for risk identification and assessment before the execution of the project and during the execution saves a lot in terms of lost man hours overall precautionary measures.
The second step in managing risk is to plan and implement the appropriate risk responses, based on the risk assessment results. The risk responses can be classified into four categories: avoid, transfer, mitigate, or accept. Avoiding risk means eliminating or reducing the exposure to the risk source, such as changing the design, scope, schedule, or location of the project. Transferring risk means shifting the responsibility or liability for the risk to another party, such as through insurance, contracts, or warranties. Mitigating risk means taking actions to reduce the likelihood or impact of the risk, such as implementing quality control, safety measures, contingency plans, or backup resources. Accepting risk means acknowledging and absorbing the risk, either because it is unavoidable, insignificant, or beneficial.
The third step in managing risk is to monitor and control the risks throughout the project lifecycle, by using various methods and metrics, such as risk audits, reviews, reports, dashboards, indicators, and triggers. The purpose of monitoring and controlling risks is to track the performance and progress of the risk responses, to identify any new or emerging risks, to evaluate the effectiveness and efficiency of the risk management process, and to make any necessary adjustments or improvements. Monitoring and controlling risks also involves communicating and documenting the risk information and actions, as well as escalating and resolving any issues or conflicts.
The fourth step in managing risk is to learn and improve from the risks and their outcomes, by using various tools and techniques, such as lessons learned, feedback, surveys, evaluations, and benchmarks. The goal of learning and improving from risks is to capture and share the knowledge and experience gained from the project, to identify the strengths and weaknesses of the risk management process, to recognize the best practices and lessons learned, and to apply them to future projects or operations. Learning and improving from risks also helps to enhance the skills and competencies of the project team and the organization, as well as to foster a culture of risk awareness and innovation.
The fifth step in managing risk is to align and integrate the risks and their management with the overall objectives and strategies of the project and the organization, by using various frameworks and standards, such as ISO 31000, PMBOK, COSO, or IRM. The aim of aligning and integrating risks is to ensure that the risk management process is consistent, coherent, and comprehensive, and that it supports and adds value to the project and the organization. Aligning and integrating risks also involves aligning the expectations and interests of the various stakeholders, such as the project team, the client, the subcontractors, the suppliers, the regulators, and the public.
The sixth step in managing risk is to cultivate and empower the risk leaders, who are the individuals or groups who have the authority, responsibility, and accountability for the risk management process, such as the project manager, the risk manager, the risk committee, or the risk champion. The role of the risk leaders is to establish and implement the risk management policy, plan, and procedures, to coordinate and oversee the risk management activities, to communicate and report the risk information and actions, and to motivate and inspire the risk culture and behavior. Cultivating and empowering risk leaders also involves providing them with the necessary resources, tools, training, and support, as well as rewarding and recognizing their achievements and contributions.
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