Mitigating the inherent risks of any large project requires planning and organization, and construction projects are no different. The construction industry faces more risks than many other industries, primarily due to the complexity and diversity of the projects. Unless building a planned community, it is unlikely that a construction firm will design and build the same structure repeatedly. Each project has unique demands and limitations that expose the builders to liabilities.
While some construction risks, like unpredictable weather, are expected and planned for, others can crop up without warning. Construction projects involve so many companies and individuals that it is hard to plan for every pitfall. However, understanding these risks and carrying appropriate construction insurance can help you prepare.
What Are the Risks Associated With Construction Projects?
The most significant construction project risks involve design process errors and delays, but risks extend into other areas.
Internal Risks
Many construction problems arise within and among the companies involved. Labor shortages, team disagreements, supply chain issues, and scheduling delays can lead to errors and shortcuts that ultimately compromise the project. Inadequate on-site safety measures increase the likelihood of workplace injuries, possibly increasing costs and exacerbating delays.
Management Risks
Disorganization and inadequate planning create problems during any step of the construction process. Failure to abide by contract terms opens companies to lawsuits, and inadequate permit tracking creates compliance issues with local authorities. Inaccurate budget projections are also a significant concern, as the project may have to be delayed or modified to address financial shortfalls.
Regulatory Risks
Failure to adequately research or comply with environmental regulations creates a major liability problem for construction companies. Some common issues are failure to complete a proper environmental risk assessment and compliance with updated regulations.
The lengthy nature of construction problems poses the risk of changing legal requirements. Local laws may change over the project’s term, and there is no guarantee that companies or individuals would be exempted from those changes. Residents and civic organizations may pose challenges to a particular project, possibly delaying construction or canceling it altogether.
Reducing Construction Project Risks
The first step in reducing construction risks is to identify all possible risks for each project. Do not assume that all projects will carry the same risks; treat each situation individually. The next step is to assess the likelihood of each risk and determine which areas need the most attention and resources. Once you complete this step, develop a mitigation plan to avoid those risks and address them if they arise. Lastly, continuously monitor and reevaluate the risks to ensure that mitigation plans are effective and see if any new risks have emerged. If you need advice for any of these steps, consult with your construction insurance provider.
About Haughn & Associates
Founded by Michael Haughn in 1986, Haughn & Associates is a full-service, family-owned, independent insurance agency based out of Dublin, Ohio. H&A strives to provide the best possible price and unique insurance solutions across a myriad of industries, including construction, IT, Habitation & Commercial Property, Agriculture, and Engineering. Devoted to providing the best of business insurance, life and disability insurance, personal insurance, employee benefits, and bonds, H&A is proof that success lies in long-standing client relations and satisfaction. To learn more about how H&A can be of service to you, contact us at (877) 802-2278.
