Risk management

September 12, 2011

What are the risks for your business. Where are your weak points? Obviously safety is a key issue, but what about warranty, defects and other issues?

Specific risk sources in construction projects include:

  • Information flow breaks
  • Adversarial relationships
  • Changes in project scope and requirements
  • Design errors and omissions
  • Inadequately defined roles and responsibilities
  • Insufficient skilled staff
  • Inadequate subcontractor experience
  • Subcontractors subcontractor
  • Uncertainty about the fundamental relationships between project participants
  • New technology
  • Unfamiliarity with local site conditions

(Klemetti, 2006)

The key steps in risk management are:

  1. Identify hazards.
  2. Assess hazards to determine risks.
  3. Develop controls and make risk decisions.
  4. Implement controls.
  5. Supervise and evaluate.

To assess the risks a simple 1-10 scale of probability versus impact can be used to help identify the key areas to be addressed.

Risk management preparation can also include the creation of scenario plans so that if a circumstance arises, rather than having to think through it when it occurs, when time is of the essence a set of plans already exist.

To help you think through some issues the Associated General Contractors have a useful insurance checklist and risk profiler.



Denis Leonard has a degree in construction engineering an M.B.A. and a Ph.D. in quality management. Denis is a Fellow of the American Society for Quality, a Certified Quality Manager, Auditor, and Six Sigma Black Belt. He has been an Examiner for the Baldrige National Quality Award Board of Examiners a Judge on the International Team Excellence Competition and a Lead Judge on the National Housing Quality Award. A former Professor of Quality at the University of Wisconsin, he has experience as a quality manager in the home building industry as well as construction engineer, site manager, and in training, auditing, and consulting with expertise in strategic and operational quality improvement initiatives. His work has achieved national quality, environmental, and safety management awards for clients. 

Denis is co-author of The Executive Guide to Understanding and Implementing the Baldrige Criteria: Improve Revenue and Create Organizational Excellence.


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