Construction Contractors Risk Management – A Guide for Builders

Construction comes with lots to consider. You have to deal with materials, labor, timelines, and owner demands. But on top of all of this, there’s one important factor that every building contractor needs to keep in mind: risk management.

Contractors’ risk management can make or break their business. But with so many moving pieces on every jobsite, it’s all too common to see risk management in construction pushed to the back burner. 

We have some good news for you. Keeping your risks under control doesn’t have to be a significant burden you carry. With some best practices in place, you can slash your exposure to lawsuits, headaches, and extra costs. Plus, we’ve got a hot tip to stay informed about these best practices for risk management in construction without taking a single extra minute from your day. 

Top tips for risk management in construction

Be careful when you hire subs

When you hire contractors, risk management gets even more important. When you bring any sub onto the jobsite, you essentially become liable for their work — and their mistakes. That’s why it’s important to have clear contracts in place, limiting your liability, and clear rules in place, ensuring the work they deliver is up to snuff. 

For a deeper dive into contractors’ risk management, check out this paper from the Project Management Institute®. 

Transfer and minimize risk when you can

All the risk of a project shouldn’t fall on you. If you are hiring subs, make sure the risk associated with the work they’re doing stays with them. 

Also, make sure you have clear expectations and realistic timelines in place with the owners. This helps to shrink your risk while ensuring that you don’t have an issue on your hands down the road because the owner expected a different outcome from the project. 

Finally, don’t take on anything you’re not confident you or your team can handle. For example, if the project requires specialty work, recommend that a contractor with that specialty be brought in. There’s no sense overextending yourself only to get hit with a headache if things don’t pan out as expected. 

Prioritize safety and organization

Two things can make a dramatic difference for risk management in construction:

  • Safety: Jobsite safety shouldn’t just be about avoiding an OSHA violation. It’s well worth spending a little extra time or money to make sure that you and all of your team members are safe throughout the day. 

    A workplace accident is one of the fastest ways to find yourself in legal and financial trouble. So take a minute and take a step back. Assess the safety risks on your project. You might be facing accidents waiting to happen without even knowing it. Put on your figurative safety goggles and think everything through. That little bit of extra thinking now can help you avoid a catastrophe.

  • Organization: Being organized saves time. When things are where they should be, you don’t waste minutes (or, worse yet, hours) searching for them. But don’t stop with physical organization. Make sure project timelines are organized, too. That way, no one drywalls over something before the work behind it is fully completed and checked. 

How building contractors can learn project risk management best practices — in no extra time

Clearly, managing your risk on the job is going to require some extra thinking from you. But that doesn’t mean you have to set aside hours in your workweek to stay informed about the latest tips for risk management in construction. 

Instead, you can use the continuing education hours you’re already required by the Michigan Department of Licensing and Regulatory Affairs (LARA) to take. All licensed residential builders need at least three hours of CE, including one hour on safety, which can help with all contractors’ risk management. 

(This page has LARA-approved options for you to choose from if you have builder continuing education requirements to fulfill for your license renewal.)

And if you’ve had your license for fewer than six years, you’ll need 21 hours per renewal cycle. You can knock that out with a LARA-approved 21-hour course that includes a section on liability and risk management in construction. Or you could take a course that specifically focuses on risk management, even helping you develop a risk management plan. 

All told, you have options. And you can use the CE hours you’re already required to take to bolster your project risk management. With those hours to focus on your potential exposures and how to manage them, you’ll be set up for success. 

From there, you just need to be careful when hiring subs and outlining expectations with owners. Put a little extra effort into safety and organization, too. With all that, you’ll be well on your way to shrinking your risk exposure as much as possible.