Handling The Intermingled Nature Of Risk
When we talk about risk to our construction clients, we are always quick to point out that risk is not as straightforward as it may seem. For example, the risk involved in taking on a subcontractor with a bad safety record not only has the potential to affect your project, but if that subcontractor causes considerable damage then some of your insurance costs may go up and you may also find your company’s reputation tarnished.
This intermingled nature of risk is complicated, and it is one of the reasons why our job is so important. But when our clients understand the intermingled nature of risk, then it becomes easier for them to take the necessary steps to reduce exposure to risk and run their businesses more efficiently.
Crossing The Risk Boundary Line
Risk does not only wind up intermingling and crossing paths, it is also interrelated. By ignoring risk in one area, you are allowing risk in others by association. For example, if your company takes the risk of not getting the right licenses to do a particular project because you feel you can get the project done fast enough to evade the authorities, then you are assuming an operational and reputational risk. On the operations side, not getting required licenses could mean that you would be banned from getting them in the future, and the risk to your company’s reputation if your fraud is detected could be considerable.
Assuming Project-Related Risks
Sometimes attempting to take on project-related risks, such as not applying the proper type and amount of resources to a project, can affect several different aspects of a project. When you try to get by without investing in the right types of safety materials, you are risking workers’ compensation cases and possible personal injury lawsuits. With more general contractors being indicted for negligence because they did not make work areas safe, you could also be risking jail time.
Exposure To Risk
The reason it is important to understand how risk is intermingled is so that you can reduce your exposure to risk as you perform your job tasks. As we have seen, taking risks in the construction industry often leads to associated consequences we never considered. But when we take the time to reduce exposure to risk, then that leads to wide array of positive effects.
Reducing the exposure to risk reduces operating costs, keeps insurance costs down, and maintains a strong level of employee morale. When your company is seen as safety conscious and works to reduce jobsite risk, then your reputation is improved and your chances of winning more jobs increases. A reduction in risk also has long-term effects such as developing better and more cost-efficient ways of working, and opening the doors to better work opportunities.
A single type of risk never stands on its own. When we identify one type of risk, we inevitably find several other types of risk associated with the original. When we work with our clients to help reduce risk, we always work on the water drop principle. The original risk is the drop of water being placed in a larger body of water, and the associated risk is represented by the rippling rings of water that is created. By getting deeper into the real implications of the ripples, we can help your company to keep risk down and make your operations safer.