Risk management in construction industry is an important part of the project planning and management. Various risks associated with construction projects.html such as financial risks, environmental risks, socio-economic and construction related risks are studied and dealt in risk management.
The volatility and capriciousness of the environment in the construction industry was never hidden from anyone. It’s easily influenced by external factors (technical, design, logistics, physical, operating, environmental, socio-political, force majeure et cetera) which are capable of not only derailing projects.html but can also create an irreparable aberration.
Risk management, therefore, becomes a pivotal instrument that helps us deal with the culling out of various risks, their analyses, and the remedial steps that could be taken to avert them in a particular project.
Types of Risks in Construction Project Management
The major risks that usually crop up in front of a project manager while helming a construction project are: financial, socio-political, environmental, and construction related.
1. Financial risks
Vacillating exchange rates, material costs, market demand, improper estimation, inflation, payment delays, unmanaged cash flow and financial incompetence of the contractor pose a huge threat of financial risks in a project.
2. Socio-Political risks
Amendments in governmental laws and regulations, law and order, bribery, payment failure by the government, increase in taxes and change in government form this repertoire.
3. Environmental risks
Inclement weather conditions, natural disasters, accessibility to the site, pollution and safety norms constitute the environmental risks.
4. Construction-related risks
Failure of logistics, labor disputes, design changes, labor productivity, rush bidding, time-gap for revision of drawings, shoddy work quality due to time constraints et cetera comprise the construction-related risks.
Risk Management Process in Construction Project
Risk management process is nothing but a series of steps that help identify and migrate the risks for the successful closure of a project. If done correctly and sincerely, construction risk management will reduce not only the likelihood of an event occurring, but also the magnitude of its impact.
In the simplest terms, Risk management process is taking preemptive actions to avoid and minimize any kind of jeopardy to a project in future.