“Risk hai toh ishq hai.”

That’s one popular line from the show, Scam 1992! But make no mistake by thinking that it is a universally applicable emotion. It is not, especially in the construction sector.

The construction risks that we are about only pump the blood pressure of stakeholders, and are best left avoided.

Let’s understand through some recent examples, shall we?

1) In December 2022, the central government imposed a pause on all private construction projects in Delhi owing to the city’s deteriorating air quality. Builders lost crores of rupees due to this unforeseen development and missed on their deadlines.

And then, just within a month, residents and builders in Uttrakhand were hit by another jolt!

2) On January 5, 2023, after witnessing the environmental horror of Joshimath, the government imposed a construction ban in the entire town of Uttarakhand due to land subsidence causing over 800 buildings to develop cracks.

Source

Construction is a risky business because of so many external factors that could turn the tide for the worst at any given moment.

This adversely affects a project causing increased costs; delays; issues with regulatory compliance; and damage to reputation.

And that is where a robust risk management plan comes in.

What is Risk Management and Why is it Essential?

Risk management in construction is the process of creating a strategy to prevent potential risks. This involves identifying hazards; evaluating the level of risk; implementing measures to control the risk; and effectively managing any remaining risks.

So what kind of risks are we talking about here? The next section sheds light on it.

Types of Construction Risks That Can Harm Your Project

Well, there are 5 major risk categories that one needs to be aware of. These are as follows:

1) Safety Risk: Say a ladder was used beyond its weight-carrying capacity, resulting in the fall and injury of two workers on site.

The safety of your crew is very important. In such cases of accidents, you are liable to legal action and could also face workers’ strike. Do you think you want to handle all this hassle while chasing your deadlines?

That’s why it's important to know the risks your workers might face and create a plan to keep them safe.

2) Financial Risks: Money is the lifeline of your project. If anything interrupts the flow of money, say an investor backs out seeing the market situation, it can cause problems.

The causes include unforeseen market crash, inflation etc. Understanding these financial risks will help you stay within your budget.

3) Legal Risks: There are legal rules and regulations to follow, and disputes can arise with clients, vendors, and subcontractors. These legal issues can cause problems and derail the project.

4) Productivity Risks: Very often, due to poor resource management at your end, or the contractor’s, your project could miss deadlines, and fall behind schedule.

A construction project manager needs to be aware of these difficulties that can affect the project.

5) Environmental Risks: Natural disasters like floods, earthquakes and the sinking of land in Joshimath, can disrupt a construction site. They are costly and can cause irreparable damage to the project.

The following chart shows different kinds of risks under each of the aforementioned categories.

Source

Being a risk manager is not easy!

Not trying to scare you off if you are a risk manager or planning to become one! But you have to constantly rack your brains to identify all the dangerous forces posing risks to the construction project at the very beginning and till the very end.

Talk about always staying two steps ahead!

And this is where the entire process of risk assessment comes in.

Risk Assessment for Safer Project Management

Risk assessment involves identifying risks, evaluating their potential impact, and deciding on suitable measures to control them.

Construction sites often have inherently hazardous activities, and this begs for a comprehensive risk assessment.

Let’s have a look at the step-by-step assessment process:

1) Hazard identification: The initial step involves identifying potential hazards that could arise in the construction project.

2) Risk assessment: Once the hazards have been identified, it is essential to evaluate the likelihood of their occurrence and the potential consequences if they do occur.

This assessment aids in prioritizing risks and determining which ones should be addressed first.

3) Establish controls: The type of control required will depend on the specific nature of the risk.

For e.g., this may involve implementing safety protocols, such as providing personal protective equipment or conducting safety training for workers.

4) Implementation of controls: After developing the controls, they must be implemented within the construction project. This involves ensuring that all workers on-site adhere to the established controls.

5) Monitoring and review: Regular monitoring and review of the risk assessment for construction projects is crucial. This practice enables the identification of any newly arisen risk and ensures that the implemented controls effectively mitigate the identified risks.

Too much to absorb?

We agree! It’s not humanly possible for the risk managers to always be ready to assess and avoid them successfully. So what could be done?

The answer is ‘upskilling with AI’!

Why Risk Managers Need to Upskill with AI?

With increasing scale of projects and associated risks, the profession has become very volatile.

Frequent modifications in government policies and the unforeseen nature of other risks demand that one integrate SaaS-based platforms into their everyday risk management tasks and leverage the power of predictive AI to automate certain processes.

In the face of growing market volatility and ever-changing professional landscape, it has now become more important than ever for risk managers, project heads, and supervisors to upskill themselves with the latest risk management softwares.

Benefits of Using a Risk Management Software in Construction

1) Improved actionable date: It provides you a greater amount of data insights, which can be used to create an action plan to facilitate better risk management.

2) Better communication & task ownership: The software provides data and insights to all authorized stakeholders in real-time, thus enabling prompt initiation of risk mitigation endeavours.

By making this entire process transparent, it also promotes ownership across all stakeholders.

3) Helps in prioritizing: Manually handling risk management can keep all stakeholders on their toes all the time and delay other tasks at hand.

Using a risk management software helps you in evaluating the priority of various risks as per various parameters and subsequently allocate specific stakeholders to handle those risks. This approach enables the rest of the stakeholders in different departments to concentrate on their current tasks, thereby maximizing productivity.

So what are you waiting for?

Ditch the complexities of unorganized and time-consuming processes by choosing the right risk management software for your company and start nipping the risks in the bud.

Remember! As your project’s efficiency grows, your reputation as a risk manager will surge!

And if you are an aspiring project manager, then NICMAR’s MBA in Advanced Project Management (APM) is one such comprehensive program that will help you gain all the necessary skills you need to take the reins of the biggest, most complex engineering and non-engineering projects, and see them to their success.