Construction Project Insurance – Phases Involved in Risk Management Process.
Every construction project stage involves a certain magnitude of risk, which may begin or continue during construction until completion. Be it institutional, commercial, or infrastructure-related projects; risks are always involved.
One essential activity every professional taking on a construction project should consider would be identifying specific hazards and setting adequate measures to manage them.
Construction professionals or contractors will most likely face setbacks throughout executing a project. Factors such as the magnitude of the project, complexity, and duration can determine construction risks and setbacks. Setbacks impact negatively on project completion time.
And as a project manager, you want to be ready for risk and associated setbacks. This is why various insurance strategies and policies are specially made to manage these risks. However, how do you identify risk, and what following line of actions should you take?
Identifying Project Risks
Common construction risks include; safety mishaps that result in worker’s injuries, labor shortages, poor site conditions, damage of equipment, etc.
Some risks are subjective to certain types of construction works. Hence, it is essential to understand the risk involved before buying the Insurance that manages them.
Accidents or injuries from faulty equipment is a high impact risk, and as such, it has a high probability of occurrence. It should be treated with the utmost attention.
Every worker present during preconstruction and construction is guided by every form of mishap onsite. Also,
equipment and machines are checked to prevent malfunction and possible harm. It would be best to hold a series of meetings with your project team to correctly assess the risk involved before talking to an insurance provider.
Key risks associated with construction projects.
●Design Risk:
Design risk mostly comes from errors and omissions in designs. Other factors include not working by the contractual design or just simply neglecting important work values. Late changes in a project design can also increase risk and impact the project completion time.
●External risk:
A project can be impacted by both what happens within and outside the site. Tax changes, Laws and local standard change, new stakeholders in a project, public objections are typical external risks associated with a construction project. When a new stakeholder becomes part of an existing project, change requests sometimes emerge.
●Project management risk:
It is not uncommon to have some managerial issue spring up in ongoing projects. Much risk abounds If a project manager fails to ensure the use of quality material. Or perhaps the failure to comply with contractual project requirements.
Also, conflict within project teams affects projects. Other project management risks are scheduling errors, contractor delays, and low-quality material supply.
●Organizational risk:
The task of putting together a team to work on a project is done by the company/organization. Should an organization neglects the importance of hiring an experienced workforce, the project could be derailed.
Failure to provide adequate protection, ensure prompt deliveries of project material are attributed to organizational
risk.
●Environmental risk:
Tiniest of things could cause much risk to a project. Incomplete environmental assessment may require the project to be placed on halt. Oftentimes, new designs, materials, or approaches may be required to mitigate or minimize environmental impact. This affects project completion.
HANDLING PROJECT RISK
Once you’ve identified the risks associated with your construction project, it is essential to provide groupings that assess each risk. The probability of risk occurrence and severity or level of impact is necessary. The result of the group will help determine risks as high, medium, or low.
And of course, high impact and high probability risks should be considered first and should be effectively managed.
After correctly assessing risk level, impact, and probability of occurrence during construction, a contractor should then opt for Commercial General Liability insurance. This Insurance is responsible for covering costs incurred from bodily injury, equipment, or property damage to project members or third parties.
Every project manager knows that in construction projects, there’s a level of uncertainty or risk associated. As such, paying attention to curtailing all forms of risk is necessary.
Here are the benefits of systematically analyzing risk involved in a project;
●Help to minimize project losses.
●Identifying risk and quantifying potential cost or downtime.
●Help provide methods, materials, or equipment to contain project risk.
●Protects your organization’s claims and reputation.
●Reduces chances of professional indemnity claims.
When Should You Turn to Construction Insurance?
A contractor could discuss risk insurance options with a reputable Insurance providing company even at the preconstruction stages of any project. You want to be best armed to the teeth before going to war.
Embarking on projects with risk management strategies prevents possible downtime. As no manager wants a delayed project completion time, construction project insurance is a crucial venture to the success of any project. More importantly, Insurance facilitates risk coverage for contractors, employees/workers, and even businesses.
ENDNOTE
Insurance is a proactive method of risk management in project construction. It is highly influential and instrumental to the success of a project. Construction project insurance ensures adequate coverage to protect the project’s interests, owners, and every entity connected with it.