Areas Of Greatest Risk Exposure
In the construction industry, risk is all around you. It is impossible for a construction company to start a job and not run into several different forms of risk, some of which can be financially devastating to the company.
When we consult with our construction client on handling their risk, we always start by pointing out the four areas of their business where they are exposed to the greatest potential risks. We often surprise clients by pointing areas of risk that they may have never considered to be significant, but we always come prepared with a way to mitigate that risk and protect our clients’ financial futures.
Your Hiring Process
We have found that construction companies that do not have a centralized hiring process are the ones that get into the most trouble with their personnel. If your personnel is not properly qualified, certified, licensed, and experienced then you are asking for trouble.
It is best to have a process in place that limits the ability to hire employees to only a few people within the company. When you are hiring for a new job, then set up a field office with human resources personnel who can execute the proper recruiting and hiring procedures. It is also important to do an annual review on key personnel to make sure that everyone has the certifications and licenses they need to legally supervise projects.
Your Subcontractor Process
If it seems like we talk about the vetting process for subcontractors a great deal, that is because it is something we consider to be extremely important. You could be moving along efficiently at a job site and have every aspect of operational risk under control, but then the job gets shut down because of something done by a subcontractor.
We cannot emphasize enough the importance of creating a thorough process for vetting subcontractors, and making no exceptions when it comes to using that process. All it takes is one subcontractor that gets through without the proper experience, safety plan, or licensing to do significant financial harm to your organization.
Your Bidding Process
We are always surprised at how many of our construction clients are on automatic pilot when it comes to filling out and submitting bids. Many clients get the bid, secure the proper bid bond, do a preliminary scan of the project, and then submit the bid.
Within every job contract there is the potential for risk that could be devastating to your company. It is critically important to have people assigned to the task of reviewing every clause of every job contract and making sure that your company understands the job completely, and submits the proper paperwork every time.
Your Equipment Buying Process
Buying a used piece of construction equipment without first seeing the verified maintenance log for that equipment is one of the biggest risks a construction company can take. With new equipment purchases, there are warranties and seller guarantees in place that can protect your organization. But if you buy a used bulldozer without first making sure it is fit for a job site, then you are asking for trouble.
A construction company faces a complicated network of risk for every job and every business operation. It is important that a company understand its greatest areas of risk, and then rely on professional risk managers to reduce the potential impact of each area.