How A Construction Company Creates Its Own Risks
In the construction industry, there are plenty of inherent risks in the field work, and in the operating aspects of running the company. Building tall structures comes with a long list of risks, and running a business in this day and age where lawyers are kept very busy also creates its own type of issues. That is why we always encourage our customers to do what they can to reduce the financial damage risk can do to their businesses by not creating risks of their own.
Poor Project Completion History
If your company consistently finishes projects behind schedule and over budget, then that can cause problems with some of your business insurance premiums. Many construction contracts contain a clause that outlines a penalty caused liquidated damages. For each day a project runs past the deadline, the owner will apply liquidated damages to the contractor’s final payment. By becoming more efficient and reliable, a construction company can shake the problems that come with poor project management.
Long History of Litigation
Insurance companies and job owners are rarely impressed when they see a construction company with a robust history of litigation and disputes. While any business argument can be settled in a court of law, most insurance companies and job owners prefer to work with construction companies that know how to stay out of court and take care of issues a more professional manner.
Low Profit Margins
One of the most significant risks a construction company can place on itself is to run at a low profit margin on a consistent basis. To insurers and investors, low profit margins indicate an inability to bid projects, poor project management, or both. Job owners are also not appreciative of construction companies that operate at low margins because that could indicate that the company cuts corners on its work.
Poor Health and Safety Record
If health and safety are not primary concerns of your construction company, then you will pay for your approach in more ways than one. A company with a poor health and safety record pays more in insurance premiums, finds it hard to attract good workers, and will not be the first choice for job owners. If your health and safety record becomes too problematic, it could put your company out of business. Your business needs to focus on ways to keep workers safe, and provide a healthy work environment.
Not Monitoring the Competition
A construction company that finds ways to stay ahead of the competition will find itself a preferred contractor for job owners, and it will also find it easier to secure investors. It is not easy to keep pace with the competition in the construction industry, but it is essential for the survival of your business that you do everything you can to remain competitive.
There are plenty of risks in the construction industry to keep any good risk management professional busy. The work becomes even more difficult with construction companies start to create their own risks through incompetence or lack of understanding. If you want to avoid creating risks for your construction company, then sit down with your risk management experts and devise ways to get your operations under control. The money you invest in avoiding risk will always get paid back to you several times over with more cash you can put on your bottom line.