Construction Company Risk Management 101

yes 1By Brittany Wren

The complexities and moving pieces in every construction company could intimidate any manager. Every job, every contract, every transaction is fraught with physical, financial and digital risk. But while risks can't be eliminated entrirely, they can be managed and mitigated. Construction professionals need to make considerations, large and small, when successfully managing risk within their company.

Selecting Customers

Managing risk starts with selecting the right customers. Sure, it’s possible to take on all jobs from all customers, but if the customers don’t hold up their end of the bargain, the construction company may lose valuable resources fixing design flaws, re-doing work that wasn’t approved by the right person, communicating with several people in a disjointed chain of command or pursuing payment for a completed job. Good customers will be financially responsible, communicate project goals clearly and be responsive to any necessary changes. The best customers will designate a project manager to take responsibility for the entire process and coordinate with the construction company.

Financial Security

Aside from carefully reading each contract, construction professionals should also consider hiring an attorney to look over contracts to safeguard against any potential financial risks, especially for big projects involving multiple stages and contractors. Another way to protect the company from risk is to craft a well-written credit policy with guidelines to determine which customers can be billed later and to set the payment terms. When no payment occurs, the company should send preliminary notices to preserve lien rights and ensure payment.


Obtaining the right insurance package can not only provide peace of mind, it can also save construction companies from multiple unexpected risks. Large companies should consider subcontractor default insurance, contract surety and claims advocacy. No matter the company’s size, the design professionals, contractors and subcontractors involved in the project should carry auto and commercial general liability insurance as well as workers compensation insurance.

Digital Security

With a growing dependence on technology, today’s construction companies face daunting digital security challenges. Client lists, contracts, intellectual property and financial records could all be vulnerable from an external or internal attack. Companies can guard these invisible assets with passwords, backup and recovery and malware protection. Even more importantly, regular procedures should be put in place to monitor and report any discrepancies or dangers, such as changing passwords when employees leave.

Physical Safety

Everyday, 6.5 million people work at about 252,000 construction sites across the country, according to the U.S. Department of Labor. For each site, many more hazards await the unsuspecting construction company: falls, collapses and electric shocks make the construction industry one of the most dangerous in the nation. Because of this, locks on equipment, safety inspections on all operating equipment and safety training for employees are musts for managing risk at any level. Additionally, construction companies should perform a thorough health and safety risk assessment before starting any job. Once the most feasible risks have been identified, appropriate safety measures can been deployed. Contingency plans should also be put in place for emergencies, such as maintaining fire-fighting equipment on site.


Among the many security liabilities construction professionals face, fraud can be easily overlooked but is just as easily prevented. For example, internal and external check fraud can be prevented by using checks with built-in state-of-the-art security features. The toner adhesion, chemically reactive paper, prismatic multi-colored backgrounds and invisible fluorescent fibers built into QuickBooks Secure Plus Voucher Checks can significantly diminish the chances of fraud.

Brittany Wren is a freelance writer living in Nebraska. She’s all about travel, coffee, board games and good poems. On the weekends, she’s usually busy remodeling her 100-year home. She writes on her blog:

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