construction risk management

Top Construction Risk Management Threats

Do you worry that your building under construction may catch fire? Or be damaged by a windstorm? Does the thought of contractor default, stolen equipment or construction materials make you nervous? It often takes a broad approach to identify your most impactful exposures. Whether you’re looking for a course of construction insurance, contractor’s professional liability, wrap-up liability, surety bonding, coverage for your tools & equipment, or commercial vehicles, we can help. Let’s get started!

Common Construction risks include:

  • Damage or theft to equipment and tools
  • Natural weather disasters
  • Contractor default
  • 3rd party losses & contract liability
  • Faulty workmanship
  • Design professional liability

Once you’ve identified the potential risks to your project, you need to assess each risk based on the probability of them becoming a reality and the impact they will have on the project if they occur. Once you’ve done that, you can learn how to manage that threat properly. Below are four ways to consider when managing your areas of risk. An organization’s risk breaks down into four quadrants: operational, financial, strategic, and hazardous.

Risk Avoidance

Even though the project team may never be able to eliminate all risk events, your company may avoid some specific risks. Risk avoidance eliminates any potential exposure to risk that may result in a possible loss. If the risks outweigh the potential rewards, there’s no shame in walking away from a project or a component. Although avoidance can guarantee to safeguard your organization, it can also close the door to opportunities and future gains; therefore, it’s crucial to weigh the decision carefully.

Risk Transfer

You will likely not be able to assume all of the risks of a particular project. Transferring the risk may involve contractual risk transfer, shifting the risk to other parties to the contract, for example, requiring all contractors on the project to carry minimum limits of commercial general liability insurance. Or payment of a premium to an insurance provider for products such as performance, labour and material bonds, builders risk, wrap-up liability, and errors & omissions liability. Insurance is the most effective strategy to shift pure hazard risk from one party to another.

Reduce the Project Risk

Reduce the probability or consequences of an adverse risk event to a manageable level. A risk mitigation strategy could include project diversification, less complex processes, conducting more seismic or engineering tests, assessing supply chain risk, or using a financial instrument such as insurance. Taking early action is more effective than trying to repair the consequences.

Risk Acceptance

Agreeing to accept the risk and deciding not to change the project plan or purchase insurance means that the cost to mitigate or avoid the risk is greater than the acceptance of a marginally low hazard or probability. In this case, you should consider a contingency plan, as the business should not take these decisions lightly. Without a risk management plan, risk acceptance decisions are potentially detrimental to the project and your bottom line if they are not made holistically and you choose to accept a high-level risk project.


Good construction risk management requires high collaboration and communication with all parties involved. It requires you to assess, quantify and understand all of your risks. Keeping everyone on the same page and working together will allow you to identify and manage risks before they become problematic. With every decision you make on behalf of your organization, you assume a certain level of risk. Instead of trying to navigate all the different insurance coverage options you have, connect with our team of experienced advisors, so we can help analyze your risks and match you with the best protection options for your unique needs. You’ll have greater confidence in your projects and sleep better knowing you’re adequately protected.

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