The construction industry is filled with risk. While many people outside of the industry only associate construction risks as being safety related—rightfully so, as it remains one of the most dangerous industries for workers—there are risks across every stage of a project. In fact, the Construction Industry Institute reports there are as many as 107 top project risks, including financial, contractual and safety risks, among others.

From things general contractors can’t control, such as the weather, to things they can control, like proper documentation, makes construction risk an everyday topic that needs to be addressed in preconstruction, during the project and all the way through completion. All risks can adversely impact project performance, compromising quality, increasing costs and delaying project completion. 

Risk is also expensive. Something as simple as poor communication can slow down workflows and result in costly delays and reduced productivity. A report released by FMI and PlanGrid revealed that construction professionals spend 35% of their time on non-optimal activities like looking for project information and data, conflict resolution and dealing with mistakes and rework. This non-optimal activity accounts for $177.5 billion in labor costs per year in the U.S. alone.

Rework, in particular, is one of the issues which has a major impact on project profitability. The same report estimated that $31.3 billion of rework in the U.S. in 2018 was caused by poor data and miscommunication.

Construction risk is everywhere and is often found in incomplete contract documents, communication breakdowns, poor document tracking and information silos. One misstep could lead to project delays further down the line, or worse, it could potentially lead to litigation—a costly and lengthy process that not only impacts an ongoing project but could impact future work with delays. 

By first understanding all of the risks general contractors might encounter on a project, only then can they find solutions to help manage and limit them as much as possible. To better oversee projects from contract negotiations through project completion and to help mitigate risks, general contractors are turning away from outdated, ad-hoc methods and implementing construction management software.

Managing Construction Risk

The dynamic and complex nature of construction projects and the associated wide-ranging risks make risk management an essential part of any construction firm. By integrating risk management strategies across the entire lifecycle of a project, general contractors can limit risk and stay one step ahead in case something does happen. 

An effective starting point for general contractors is to conduct a risk assessment. Here are some tips to ensure a contractor checks all of the boxes:

• identifies and describes critical issues related to a project, allowing the project team to focus on risk factors of potential concern; 
• evaluates the project risk exposure and provides an indication of its potential impact of risk during the project’s life cycle;
• indicates which components of the project should be considered for risk mitigation as part of an overall risk management strategy;
• focuses analysis on issues unique to each project; and 
• is flexible to meet the needs of almost any individual project.

Also, plan for risk through the entire project’s lifecycle—from preconstruction through completion. Plan for risks and run “what if” scenarios to determine protocols and what actions to take if something were to happen, carefully weighing the costs and benefits of each strategy. And as the project progresses, it’s vital to continue to monitor for risk, as information and plans might change along the way.

Construction Management Software Is a Gamechanger for Mitigating Construction Risk

While risk is part of the DNA of construction projects, the good news is that this risk can be mitigated with the use of construction management software. This technology is designed to provide operational transparency, improved documentation and data collection that mitigates risk to bring more certainty to construction projects, improve project outcomes and increase profitability.

To effectively mitigate risk, contractors should leverage a comprehensive project management platform that:

• Breaks down data silos. Cloud-based technology can help break down data silos by centralizing communication and providing real-time visibility into projects and instant access to project documentation. It organizes information in a unified environment that allows all project stakeholders to seamlessly review and respond to critical documents and transactions, tracking every step along the way, making it possible to prepare, file and instantly share critical documentation with members of both internal and external teams from anywhere.
• Creates, tracks and manages documents. Documentation is an important component of reducing risk on any jobsite. With document management features that help construction firms track contracts, compliance, plans, specifications and more, general contractors not only save time and money, but the technology makes information more accessible, fosters a collaborative environment that keeps internal and extended project teams updated on the latest versions of documents, and helps teams complete projects according to plan. Construction management platforms also help firms mitigate risk associated with disputes and litigation by acting as a central repository for all project documents from preconstruction to project delivery. This technology provides the operational transparency, improved documentation and data collection that can help contractors deliver more successful projects and avoid the settlement table.
• Makes workflows seamless. With the functionality to digitally generate, share, approve and execute change orders, construction management platforms help construction firms establish consistent workflows that ensure the proper process is being followed for collecting vendor quotes, keeping drawings up to date and ensuring that the appropriate negotiated unit prices and markups are charged for change orders. Tools that also enhance communication between general contractors and subcontractors have also become an important feature in construction management technology. The result is improved collaboration, reduced risk, greater accountability and increased compliance, as well as an overall improved contractor/subcontractor relationship.
• Enables robust reporting. Robust reporting features help contractors mitigate risk and manage the complexities of projects by tracking both internal contractor changes and external customer changes, job costing, managing negotiated unit pricing rates and in-depth reporting that focuses attention on exposure areas for both contractors and owners. An effective mobile app can also be used for time tracking, generating field reports, managing documents and inventory and reporting on project progress.
•  Improves safety. Construction management platforms provide the ability to enter, store and share data from anywhere, enabling remote collaboration. During the pandemic, these platforms are shifting in-person tasks such as site inspections and jobsite visits to digital platforms, which helps keep workers socially distant and safe while continuing to move projects forward. The cloud-based technology also connects all project stakeholders wherever they are and ensures real-time access to day-to-day project details and reports as well as information on pandemic-related safety and government updates. 
•  Facilitates a data-driven approach to decision making. One major benefit of technology is its ability to collect data and learn from it. Construction management technology provides a connected, data-driven approach to mitigating project risk, allowing construction firms to track all project resources, assets and activities, which minimizes risk and protects the profitability of projects. The real-time information and insights provided by the technology allow for data-driven decision making that is vital to avoiding cost overruns and schedule delays that negatively impact the bottom line.

The technology also helps firms manage financial risk by simplifying estimating and integrating accounting into project management to more accurately assess how job progress and profitability stack up against real-time revenue recognition—the barometer for measuring job profitability, cash flow and working capital efficiency. 

Benefits of Reducing Risk

The right risk management processes and tools can help construction firms reduce risk which yields significant financial and operational benefits including:

• improving financial results;
• increasing safety;
• enhancing transparency, efficiency and productivity;
• streamlining and strengthening decision making;
• elevating the quality of construction execution and project delivery; and
• avoiding costly claims, disputes and litigation.

Keeping risks under control can be challenging for contractors operating in an industry fraught with risk. However, by taking the necessary precautions and by implementing construction management technology, general contractors can improve financial results, increase jobsite safety, boost team collaboration and elevate the execution of a project all while avoiding costly claims, disputes and litigation.