Risk management in construction is a field that should not be put aside by any contractor. Risk management is important to help us delivered the end product with in the stipulated time frame without lost or minimum lost in our profit margin and the most important is maintaining our good reputation.
Road construction,just like other construction work, it is prone to risk. Whatever risk that involve in construction, at the end of the day, it will count as dollar and cent. In-view of this situation, contractor have to find ways to mitigate this loses.
Road construction,just like other construction work, it is prone to risk. Whatever risk that involve in construction, at the end of the day, it will count as dollar and cent. In-view of this situation, contractor have to find ways to mitigate this loses.
How to minimized and address this
issue? Before we discuss any further, let's take a look at what is some of the scope
of work involve. Below are some of the scope of work involve.
1. Earthwork
2. Bridge
3. Sub-base
4. Road-base
5. Tar seal ( ACB,ACW,Tack coat
& Prime coat)
6. Road paint or Road marking
7. Guard rail & other road
furniture
8. Street lighting.
As listed above, we can see there
is eight(8) trades involve to roughly complete the road.Indirectly this information
is telling us that we need eight specialist team. Then how to relate this with risk
management? Here how to address this. Since we already know what trade involve, The next step is doing brain storming. This is important to identify any possible risk that will involve in each of the trade. This is basic rule of risk management. It will be impossible to come out with risk management plan without knowing what possible risk to take into account. The root to risk management is " what is the risk that we expecting to occur with-in those trade". Only by knowing what is the risk that we can start working the plan that is the best management or solution to prevent or minimized the risk.
Now let we look in to the earthwork trade. What is the possible risk that we have that will prevent us from completing this task as per required time frame as agreed in the contract. Let list down some of the possible risk.
Possible risk in earthwork.
1. Bad weather
2. Machine breakdown
3. increase in fuel and diesel pricing
4. accident
5. impact to environment
6. increase in cost of material
since we already know the possible risk that will affect the work, than only we can plan on how to manage the risk. As we know, if we allow the possible risk to take place or happened, it will resulted into lost of profit or even jeopardize our reputation, what we need to do is to lay a proper plan of risk management to address these event. For example, we look in to the bad weather (rainy day), first we better look at the number of days throughout the month of previous years. Do some calculation, find out how may days is raining day of the month of the previous years. let say it is average of 10 days. This simply mean that we have a risk of non-workable day of 10 days of the same month which resulted in less productivity of the month. However we are tied by the contract that we need to complete the work at a determined date. Hence what is our choice that we have to manage this risk? May be one of the choice is increase the number of work force at the particular month. As now we have the solution to this risk, then the next step is to documented it in our risk management plan. When the event happened we already know what is the consequence and how to address it.
The easiest way out to address any risk in construction is we can always outsource this various trade with certain contract sum to others. In doing this we have the option to outsource the whole trade or only the works. This strategy will help us in a way, should there be any of the risk listed above happened, we already passed this unpredictable situation to others.Thus we can maintain our profit. However a proper agreement have to be prepared and terms and conditions must be clearly stated. One disadvantage of this type of risk management is we are putting our reputation at a risk if the appointed team do not have a risk management plan.
Now let we look in to the earthwork trade. What is the possible risk that we have that will prevent us from completing this task as per required time frame as agreed in the contract. Let list down some of the possible risk.
Possible risk in earthwork.
1. Bad weather
2. Machine breakdown
3. increase in fuel and diesel pricing
4. accident
5. impact to environment
6. increase in cost of material
since we already know the possible risk that will affect the work, than only we can plan on how to manage the risk. As we know, if we allow the possible risk to take place or happened, it will resulted into lost of profit or even jeopardize our reputation, what we need to do is to lay a proper plan of risk management to address these event. For example, we look in to the bad weather (rainy day), first we better look at the number of days throughout the month of previous years. Do some calculation, find out how may days is raining day of the month of the previous years. let say it is average of 10 days. This simply mean that we have a risk of non-workable day of 10 days of the same month which resulted in less productivity of the month. However we are tied by the contract that we need to complete the work at a determined date. Hence what is our choice that we have to manage this risk? May be one of the choice is increase the number of work force at the particular month. As now we have the solution to this risk, then the next step is to documented it in our risk management plan. When the event happened we already know what is the consequence and how to address it.
The easiest way out to address any risk in construction is we can always outsource this various trade with certain contract sum to others. In doing this we have the option to outsource the whole trade or only the works. This strategy will help us in a way, should there be any of the risk listed above happened, we already passed this unpredictable situation to others.Thus we can maintain our profit. However a proper agreement have to be prepared and terms and conditions must be clearly stated. One disadvantage of this type of risk management is we are putting our reputation at a risk if the appointed team do not have a risk management plan.
