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Risk Management for Home Builders

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Risk Management for Home Builders

Don't get caught out. Know the risks and prepare for risk management

September 12, 2011
Construction site safety signs
Photo: Pxhere

What are the risks for your business? Where are your weak points?

Obviously, safety is a key issue for home building companies, but you also need to consider 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
  • Too few skilled staff
  • Inadequate subcontractor experience
  • Subcontractors' subcontractor
  • Uncertainty about the fundamental relationships between project participants
  • New technology
  • Lack of familiarity with local site conditions

(Klemetti, 2006)

The key steps in risk management for home builders 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-to-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 Associated General Contractors has resources on its website, including an insurance checklist and risk profiler.


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Written By

Denis Leonard has a degree in construction engineering, and an M.B.A. and a Ph.D. in quality management. He is a Fellow of the American Society for Quality and 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. 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. 

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