What Is The First Step In Risk Management?

What is the first step in risk management? Why does every construction project often overlook the risk management component? Why isn’t this a tool or a focus in every team meeting? We’re going to discuss this in this blog post because I get asked all the time: How can we finish projects on time? How can we have lower costs and fewer overruns? It all comes down to not only preventing but managing your risks, so stay with us. 

The Impact of Risks in Construction

Risks in construction are like black swans, unexpected and impactful. They are the big problems, the boulders in the road, the situations that make you sick to your stomach when they happen. They can severely affect your career, keep you up at night, hurt your family, and strain your finances. These risks, if not monitored and managed, can prevent you from getting promotions and impact your ability to meet financial obligations. Risks are detrimental, and it’s crucial to emphasize the importance of having a risk management system or method.

Importance of Identifying Risks & Problems

To have an effective risk management system, you need to know how to identify your risks. Every person, marriage, company, church, and country has problems. Statistically, all 7.5 billion people on earth have problems. The only problem is thinking we don’t have problems and not fixing them. If you have risks or problems on your project, it’s essential to let everyone know. As a superintendent or project manager, you shouldn’t carry that burden alone. Creating a culture where problems are not seen as a problem but as something to be dealt with together as a team is key.

How to Identify Risks in Construction

1. Create a Culture of Openness: Encourage your team to believe that problems are not a problem.
2. Bring Problems to the Surface: Discuss problems in any forum available.
3. Anchor Problems to Real Data: Use data to understand the impact of the risks.
4. Regular Discussion: Take time every week to discuss and solve the problems.
5. Take Action: Actively deal with the identified risks.

To understand the concept, you’ll want to identify your risks during the fresh eyes meeting and pre-construction phase. These risks should be documented in a risk and opportunity register, detailing the days and dollars at risk. This helps you get a clear picture of what you’re dealing with and allows you to measure it.

How to Discuss & Solve Risks in Construction Meetings

In every level 10 meeting or team weekly meeting, identify all issues or risks at the start. Then, move into the IDS (Identify, Discuss, Solve) phase. Discuss these risks, know what actions to take, and assign someone to each risk. This ensures the risks are managed and remain a focus for the team.

How to Deal with Risks in Construction

There are three ways to deal with risks:

1. Absorb It: Accept the risk as a business decision and take it out of your fee.
2. Cover It: Add schedule or financial contingency to cover the risk.
3. Remove It: Use proper planning, strategy, and tactics to eliminate the risk.

There’s no place for wishful thinking in risk management. Instead, adopt the 10th man rule from “World War Z.” This rule suggests that if everyone agrees things will be okay, the 10th person must play devil’s advocate and plan for the worst-case scenario.

Important Reminders About Risk Management

To drive results on your project, know your risks, write them down, assign them, and start fixing them on a weekly basis. Whether you absorb, cover, or fix the risks, it’s crucial to take action. No wishful thinking allowed. If you want to build a remarkable project, dig in, find the problems, and start addressing them. Pair your optimists with those who dig deep and create real strategies, as wishful thinking never was and never will be a strategy.

For further reading, check out the linked blog post in the description below. Remember, finding and managing risks is essential for a successful construction project. On we go!