Even though bottom-line and performance risks are regarded as the most serious threats facing the construction industry, few construction firms use formal risk mitigation procedures, according to McGraw-Hill Construction's latest SmartMarket Report.
As the report points out, the complexity of today's construction projects creates greater risks for inefficiencies than those faced by other industries. For example, participants in the study revealed that:
Firms experience delays on nearly one-quarter (24 percent) of their projects.
19 percent of projects go over budget, and the overrun averages 14 percent of the total project cost.
11 percent of projects experience disputes, with an average claim of more than $3 million.
Addressing risks like these early can help firms achieve significant cost benefits, and the report suggests that construction firms focus on:
building a strong project team,
embedding risk management into firm culture,
implementing a rigorous risk assessment and mitigation process,
engaging in activities that reduce the likelihood of litigation and
utilizing technologies such as building information modeling (BIM).
You can download the free 53-page report, Mitigation of Risk in Construction, here. (Registration required.) It's a comprehensive analysis that investigates the level of impact caused by risks, the scope of use of risk assessment and mitigation procedures and the frequency and causes of litigation, particularly for firms that work on infrastructure projects worth $100 million or more.
As you might expect, the most complex projects in the construction industry are often those in the infrastructure sector, and the report takes an in-depth look at this sector, while also detailing risks related to the energy sector, healthcare, insurance considerations and sustainability, as well as insights into how design-build and integrated project delivery can reduce risk.