Last Updated on March 15, 2022 by Admin
Risks are an inherent part of any business, and it takes specific measures and strategies to keep them under control. In the construction industry, risks are everywhere. We’ve highlighted the twelve areas of risk management and what companies can do to minimize their impact.
1. Financial Risks
Any factor or event that could affect a company’s financial standing can be classified as a financial risk. For instance, late payments from clients, increased materials prices, cash flow shortages, shifting market dynamics, etc. These risks affect companies of all sizes, but the impact felt will often vary.
Managing financial risks requires a holistic approach to the company finances. You need to anticipate risks and plan for all the possibilities in advance. That way, you minimize their impact through better decision-making.
2. Health and Safety Risks
The construction industry is prone to health and safety risks from every corner, whether manufacturing plants or construction sites. Similarly, any mistake or unanticipated event could lead to health and safety issues, from slips and falls to accidental deaths due to machine failures.
A solution is to have a robust risk assessment strategy focusing on health and safety concerns. There should also be strict policies and procedures on health and safety to minimize exposure to potential risks.
3. Corruption Risks
Corruption is a huge risk to every company’s reputation. How well your construction company remains fair in its processes often narrows down to the kind of leaders in the powerful positions. Corrupt leadership that upholds dubious and shady operations can easily erase the company values and make everything work in their favor.
Whether you are facing obvious corruption risks or not, always have measures in place to hedge against potential scandals. You may choose to have regular audits on the high-risk areas or departments or have clear rules to govern processes that could easily become susceptible to corrupt dealings.
4. Trust and Identity Risks
Like any other business, trust in the construction industry is hard to come by. Clients always want to know who the contractor has partnered with, the key employees, etc. If you are not transparent about how you run your business, you could face serious trust issues in the long run.
One way of avoiding trust and identity risk is to adopt a robust communication strategy that thrives on honesty and transparency. If there’s anything crucial or unpleasant to communicate, always be the one to speak them out.
5. Environmental Risks
Most construction activities pose some risks to the environment, and it’s your responsibility to minimize the impact these risks could cause. Building a new structure, for instance, poses risks to land, air, and water. Other threats may originate from the large manufacturing plants producing building materials.
Regardless of the risks subject to the environment, it’s possible to anticipate them and work on a solution. An example would be to have controls in place to minimize the impact of construction activities on water and air quality, vibration and noise levels, landscape, etc.
6. Employment Risks
Any business that hires contractors or full-time workers may face employment risks in one way or another. Issues such as withholding pay, wrongful termination, paying less than minimum wage, child labor, etc., may mature in ways that are difficult to comprehend.
The best way to minimize employment risks and their consequences is to have a solid and knowledgeable HR team to ensure your company is compliant with all the laws and regulations.
7. Equality and Diversity Risks
Inequality and lack of diversity are common risks that are easy to spot in the modern workplace. The rise of social movements and their popularity on social media platforms has made it difficult for companies to escape the consequences of inequality, discrimination, or any act that offends a section of the population.
The only way out of these risks is to stick to the rules and regulations that protect your company and your people from facing any form of inequality, discrimination, and unfair treatment.
8. InfoSec and Data Protection Risks
Any company that collects customer or employee data is at risk of violating some critical data protection laws. Technology has made it easy to collect data from anyone and has also made it easy for digital invaders to access this data.
To protect your company from information security and data protection risks, you should comply with key regulations such as GDPR. It’s also advisable to invest in critical data protection technologies and talent to stay ahead of potential threats.
9. Corporate Social Responsibility (CSR) Risks
Corporate social responsibility is all about the impact your business operations have on society and the environment. The goal is for companies to take responsibility and minimize any risks and negative influences.
CSR risks revolve around human rights issues, work relationships with employees and shareholders, effects on nature and environment, etc.
Anticipating CSR issues and having a mitigation strategy for each risk is one way to minimize potential impact. You may also consider working with a knowledgeable CSR consultant to guide you while making major business decisions.
10. Strategy and Performance Risks
Safeguarding your competitive advantage in the market often means being on the frontline and carefully executing your winning strategies. However, volatile markets can sometimes make your strategic plans obsolete, which could have a huge impact on your overall business operations.
Strategy risks are tied to market dynamics and operational issues such as losing key talents or customers. A solution to these risks is always to anticipate any strategy and performance risk and craft an exit strategy in advance.
11. Cybersecurity Risks
Unlike InfoSec and data protection, cybersecurity is broader, and it encompasses everything from physical IT systems and resources to digital infrastructures such as cloud servers and networks. Common cybersecurity risks include phishing, ransomware, malware, and DDoS attacks. Mitigating cybersecurity risks requires a comprehensive risk management strategy encompassing risk assessment, analysis, evaluation, mitigation, and monitoring.
12. Quality Management Risks
Quality is a critical aspect of the construction industry. Clients expect the construction company to deliver on the expected quality standards while keeping the costs, deadline, and safety in check. Any deviation from the pre-agreed standards should be considered a critical quality issue.
To avoid such risks, you should have quality policies and management guidelines that outline the quality of materials and products to be used. There should also be standard techniques and procedures to be followed and reviewed until the work is completed.
Managing Risks in Your Construction Business
Staying ahead of all the above risks can be challenging but not impossible. The first step to success is awareness. You need to acknowledge that these risks exist before you can go out and implement the necessary risk management and mitigation strategies. Always leverage technology to your advantage and seek professional guidance whenever necessary.
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