Top 10 construction risks and their solution. Construction is a risky business, with every construction project having its challenges and opportunities. One of the most important aspects of a construction project is to identify opportunities and risks and manage them accordingly. If poorly managed, risk can be fatal to a construction project. For good project management, we need to identify, control and monitor risks properly.

Risks are not just negative uncertainties. Good risk management leads to increased profits, good customer relationships, and repeat projects. Top 10 construction risks and their solution

Dangers relating to uncertainty relating to the risk

A hazard is a circumstance that constitutes a life-threatening situation or a threat to the environment, property, or personal integrity. From a safety perspective, a problem that presents a life-threatening or physical impairment to people on a construction site is a danger. Hazards are situations that can turn into incidents or disasters.

Uncertainty is the probability that an event with imperfect information or little information will occur. An uncertainty has more than one possible outcome that is likely to occur.

On the other hand, a risk is the result of an event predicted on the basis of statistical probability. With the risks, there is great predictability of failure. Any high probability event that could affect the quality and cost of progressing the project is a risk. Dangers and uncertainties are things we should be wary of, but we don’t view them as risks.

Common risks (and examples of solutions)

As we mentioned earlier, construction is a volatile business with many risks. Below are some of the common hazards that could arise during the construction period.

1. Delays

There is no doubt that delays are the most common construction risks. Although contracts take into account deadlines and schedules, they rarely take into account all the variables. Delays occur due to poor project management, change orders, accidents, or an inappropriate schedule.

The best way to reduce delays is to prepare for them in advance. Communication should also always be open between project stakeholders to minimize the cumulative effect of delays on a project.

2. Inappropriate documents

One of the hallmarks of construction projects is bulky paperwork. This ranges from change orders, assessments, licenses, and approvals. Some entrepreneurs mismanaged their documents by storing their documents on the dashboard of their vans. Losing a receipt or paper can be time-consuming and expensive. The risks are different in every job. When we are looking at large projects with many subcontractors, with different submission and compliance processes, paperwork can be an issue. When it comes to licensing and insurance, if there are inappropriate documents, it can lead to legal problems.

The best way to avoid this is to be organized. Every contractor should have a document checklist that they cross-check to make sure all documents are in order.

3. Price of materials and profitability

The pricing of materials and profitability are some of the most important risks in a contract. When a contractor enters into a lump sum contract, he is at the mercy of fluctuating material prices if he does not leave enough leeway to cover emerging costs. Some issues that can drive up costs are natural disasters, increased demand for materials in an area, or labor issues.

An entrepreneur can account for price spikes by increasing the brand to absorb a price increase. Top 10 construction risks and their solution

4. Labour shortages

Finding a skilled workforce is always a problem in the construction industry. Most contractors don’t have full-time staff, and they hire people back and forth depending on the scope and complexity of the project. If a contractor lands on a project but doesn’t have enough manpower to complete the project, it will inevitably slow down everyone on the project. Pushing back the schedule negatively affects the profitability of a project. When unions are involved, solidarity among workers can cause the whole team to walk away during a strike.

An entrepreneur can curb labor shortages by developing community partnerships and giving employees a fair wage package.

5. Bad project management

Seasoned subcontractors always have a problem when working with a new contractor. They do not know his type of work experience and his level of organization. A poorly organized entrepreneur poses a risk to the success of the project.

Poor project management leads to communication problems and conflicts. This can impact other projects a contractor is managing as well as planning issues. A contractor should have systems in place that will ensure that the project proceeds transparently and according to plan. Top 10 construction risks and their solution

6. The scope of the work is not clear

When the scope of work is poorly defined, it is a management issue that will affect the success of a project. It is difficult for one to stay on track on a project with an ill-defined scope.

It is dangerous to enter into a lump sum contract when your area of work is ambiguous. The unclear scope of the work will prove to be a profit killer. This is due to increased material prices, site conditions, and other project variables.

Another way to improve profitability is to improve communication with project stakeholders at all levels. It helps you stay profitable.

7. Change orders

Change orders are inevitable in the construction industry. Poor change order management can hamper the success of a project, as it means missed opportunities and budget overruns.

When change orders appear, it is essential to write them down and sign them. If it is not documented, a contractor can end up doing work that the customer disapproves of.

The best way to handle change orders is to keep all the necessary documentation and submit changes to avoid payment disputes.

8. Payment disputes

Payment takes a long time in construction. These disputes affect entrepreneurs because they take a long time for entrepreneurs to receive a paycheck. Loans and interest rates reduce profit margins and sometimes cripple certain operations of a construction company. Over time, an entrepreneur can be in a position where they barely break even on one project while still relying on money to tackle other projects. Entrepreneurs can avoid payment disputes by issuing payment notices on time. A contract should also have a clearly defined payment schedule, and a breach of the program will qualify as a breach of contract.

9. Health and safety hazards

Construction sites are dynamic and conditions can change quickly, posing unprecedented health and safety risks. Major accidents can lead to serious deaths. The goal is to make sure the project runs smoothly from inception to closing.

A Safety Manager is visiting the Site

In addition to the potential damage to workers, accidents result in reduced project productivity. This is due to the low morale of the project workers. Low productivity also causes delays in the project and hence budget overruns.

The best way to reduce health and safety risks is to train staff on how to avoid and deal with accidents when they do occur. It is important to inform all staff and contractors of their commitment to safety before the start of the project.

10. Bankruptcy

The rate of financial failure in construction projects is alarming. Businesses find that the easiest way out of economic problems is to file for bankruptcy. After declaring bankruptcy, some companies restructure and come back as more vital businesses, while others go entirely underwater. In the event of bankruptcy, it freezes the entire progress of a project. Bankruptcy can lead to repossession of on-site equipment or even equipment that has already been financed.

How to identify the risks

As we have already discussed the common risks for construction, we should identify the risks specific to a project. Risk identification should be done as early as possible in a project. The project team primarily identifies project risks during the pre-construction stage. Failure to identify and manage risks on time inherently means accepting the risk present in a project. Top 10 construction risks and their solution

The best way to identify risks is to have brainstorming sessions with project stakeholders. The goal is not to solve a problem, but to identify many possible scenarios and their impact on the project. During brainstorming, the project team examines similar projects, their scope, location, risks involved, and necessary actions are taken to reduce the risks.

In addition to this, the project team should hold regular meetings throughout the construction process. Holding these meetings deals with all emerging and new issues that may emerge in the foreseeable future.

By Abdulnabi Ali Isa Almarhoon

Mr. Abdulnabi Ali Isa Almarhoon is Senior Health Safety and Environmental Manager, Trainer, and Consultant working in the largest construction group of Bahrain. He has more than 25 years of experience in the field of HSE.

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