Risk Management in Construction: Stopping Small Problems Before They Become Big Ones
In this blog, I walk you through the risk management component from my book Elevating Pre-construction Planning. Risk management isn’t just about avoiding catastrophic disasters, it’s about preventing the compounding effects of small, everyday risks that can snowball into major project setbacks.
When you already have a solid production plan and lean contract inclusions, you’re in a great position to minimize risks. But the truth is, most projects don’t fail because of one massive problem, they fail because of a chain reaction of smaller, manageable issues that weren’t handled early enough.
Step 1: Anticipate the Risks
Every project is unique, different team members, site conditions, and constraints. In pre-construction, you need to identify as many possible risks as you can through design planning and “fresh eyes” meetings.
Once identified, risks can be:
- Eliminated through planning.
- Mitigated with financial or schedule contingency.
- Absorbed with extra effort (least preferred).
- Ignored, which is not an option for serious builders.
I track all risks in a Risk and Opportunity Log with an OPER (One Person Ultimately Responsible) for each. This keeps accountability clear and ensures weekly updates in team tactical meetings.
Step 2: Forecast the Future
Here’s the trap: thinking your project is “different” enough to ignore historical data. Even if it truly is special, it’s not special when it comes to the types of risks it will face.
Instead of using one “similar” project as your benchmark, use a Reference Class Forecast (RCF) a set of 50+ similar projects (or at least 25 from your region) to establish realistic cost and duration anchors. Don’t lower those numbers because you feel confident. Keep the anchor and plan as if the risks will happen, then work hard to ensure they don’t.
RCF process in a nutshell:
- Identify similar completed projects.
- Gather parameters, budget, schedule, roadblocks, constraints.
- Analyze risk trends and outcomes.
- Maintain the average as your anchor for realistic forecasting.
- Identify major risks (“black swans”) and build contingency around them.
Why This Matters
A strong risk management plan aligns your production plan and contracts to cover realistic threats. It keeps your team focused on preventing issues instead of reacting to them. Done right, this process helps you under-promise and over-deliver something every client appreciates.
Key Takeaway
Most projects fail from many small risks, not one big disaster. Use data from past projects, track risks weekly, and plan as if they’ll happen, then work to ensure they don’t.
If you want to learn more we have:
-Takt Virtual Training: (Click here)
-Check out our YouTube channel for more info: (Click here)
-Listen to the Elevate Construction podcast: (Click here)
-Check out our training programs and certifications: (Click here)
-The Takt Book: (Click here)
Discover Jason’s Expertise:
Meet Jason Schroeder, the driving force behind Elevate Construction IST. As the company’s owner and principal consultant, he’s dedicated to taking construction to new heights. With a wealth of industry experience, he’s crafted the Field Engineer Boot Camp and Superintendent Boot Camp – intensive training programs engineered to cultivate top-tier leaders capable of steering their teams towards success. Jason’s vision? To expand his training initiatives across the nation, empowering construction firms to soar to unprecedented levels of excellence.
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