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Five Sources of Risk to Consider For Your Next Construction Project

June 29, 2022

Supply chain limitations, cost management uncertainty and ever-changing interest rates face the construction industry every day.

Those in the industry, from financiers, risk managers to project owners, must anticipate what may lie ahead. They also need to consider new strategies to mitigate risks tomorrow or in the future.

Our risk management team at Oswald has identified these five important sources of construction risk to consider:

  • Safety Risk, of crews on the project
  • Financial Risk, in this climate of volatile interest rates
  • Legal Risk, who may be liable if something goes wrong
  • Project Risk, completing the work as promised
  • Environmental Risk, making sure work is completed responsibly

Planning for these construction risks and scenarios includes identifying and prioritizing the risks within these five areas, determining risk response strategy and executing your response plan by involving key players, including the owner, design team and contractors.

In today’s construction environment, we are seeing the impact of inflation on rebuilding costs for projects spanning 12 months or more. Steel, lumber and polymers are seeing price increases on a quarterly basis. Materials that were purchased in the fourth quarter of 2021 may be 15-20 percent more expensive than originally planned.

Our team from Oswald Companies can proactively review your construction risk management plans with an eye on a range of factors, such as delays in material deliveries and rising interest rates on project financing, to name a few. Another point to consider is a Consolidated Insurance Program (CIP) or a program under which a principal provides general liability insurance coverage, workers’ compensation insurance coverage or both. These are incorporated into an insurance program for a single construction project or multiple construction projects.

Newer projects are being written under CIPs. To that end, managers need to understand how a corporate program may or may not apply in the event of a claim on a CCIP (contractor-controlled insurance program) or OCIP (owner-controlled insurance program) project. If a project takes the consolidated insurance route, it’s important to exclude the exposure basis from your corporate program to avoid double paying for coverage.

A third area of risk mitigation for construction projects is ESG (Environmental Social and Governance) awareness. Investors are increasingly applying these non-financial factors to their analysis as they identify material risk and growth opportunities with key partners.

ESG Awareness is not just nice to have as part of your portfolio, it’s often essential for closing the deal. Many public and private owners with whom we work want to know how contractors are addressing environmental, social and corporate governance responsibility in a proactive manner.

In addition to the building process, the risk management strategy should be viewed as one of the most critical steps of a construction project. The time to assess your risk is now, before any problems arise. In uncertain times, the certainty of having a proper plan and proper coverage makes your risk more manageable to all involved in the project.

For more information, visit our Design and Construction Hub here or contact me directly.

Dale Kaprosy
Senior Vice President


Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy.