Types of risks in construction projects

All business ventures carry certain risks. No matter how detailed the plans are, there are always setbacks, problems and unforeseen events that can lead to delays or cost overruns. Construction, due to all the projection and phases involved, is one of the sectors especially exposed to different mishaps. For this reason, adequate training in the field, such as taking a Master in Construction Management, is essential to minimise risks and their impact on works.

Common risks in construction projects

Having a good construction risk management system will make it possible to identify external and internal factors that can negatively affect the project in order to reduce the chances of their occurrence and to be able to finish the work on time and staying within the planned budget.

The “good news” is that many of the risks intrinsic to the construction sector are known and can be foreseen:

• Delays in the work: Project delays are one of the most common construction setbacks, whether due to accidents, last-minute changes, natural disasters, or lack of materials. Avoiding these types of risks requires careful scheduling and quick response to minimise the cumulative effect that delays can have.
• Contractual issues: Construction projects usually require a lot of paperwork, so it is not surprising that the lack of a signature or a permit causes the work to stop. To avoid that risk, managers need to make sure they get the proper licenses and approvals on time.
• Change orders: Virtually all construction projects undergo changes at some point, either at the request of the client, due to technical problems or due to the impact of the construction on the environment or surroundings. For this reason, it is necessary to anticipate from the programming of the work the possibility of including changes without exceeding the budget.
• Lack of resources: Construction works, particularly the largest ones, demand a large amount of economic, human and material resources. Not having all the financing for the project from the beginning, not having qualified personnel or not having the necessary materials in any of the phases of the work can represent a serious delay that ends up affecting the profitability of the entire project.
• Work accidents: Construction sites are often dynamic, creating numerous risks to the health and safety of workers. For this reason, one of the priorities of risk management plans in construction works is to guarantee their implementation without accidents from start to finish.

Risk management plan for construction project

It is important for any kind of construction project for there to be a risk management plan. This can be done in a few simple steps, such as the following:

• Identify risks: Each project is unique, so it is important to identify the nature of each of the risks to which it is exposed. To do this, it is necessary to start from the context in which the work will be carried out since there are not the same risks in an underground project as in the construction of a skyscraper, for example.
• Risk quantification: All risks do not have the same repercussions. That is why it is important to evaluate the impact of each one in terms of costs and time. It is also essential to estimate the probabilities of occurrence in order to establish priorities. With this information, projections are made that allow adapting the budget and the execution plan.
• Know the response: The risk management plan in construction projects must provide a response in case the setbacks were to occur, as well as an allocation of additional resources. Therefore, it is necessary to carefully analyse what type of actions can mitigate the effects of the eventuality and design a specific risk management plan to avoid allocating more resources than are strictly necessary.