If you’ve been in the construction business for a while, you would be well aware of the several risks associated with construction projects. From small problems like minor cost increases to serious issues like workers’ safety and disruptive natural disasters, many things can go wrong and result in the project coming to a halt.

Naturally, risk management is a significant aspect to consider in a construction project. A comprehensive risk management plan can help set your company apart as a reliable entity.

What Exactly Does Construction Risk Management Involve?

Risk management essentially means identifying the risks to a project and devising a roadmap to handle them should they manifest into a reality. In the construction business, this means extensive planning, constant monitoring, and controlling any risky instances.

Some of the most common risk factors in a construction business could be related to finances, safety, legalities, poor resource management, the environment, political changes, government policy, and in today’s day and age, risks related to the pandemic.

How Can You Manage the Risks?

Once the risks have been identified, they need to be thoroughly evaluated. The evaluation should be based on their probability (of actually becoming a reality) and the potential impact they’d have on the project.

Once you’ve assessed each risk and ranked it according to probability and impact, you’d know what to tackle first. Naturally, the ones with the highest likelihood and effects should be handled first. Since the risk is only just a “risk” at the moment, all you really need to do is figure out the finances and effort that would be factored toward the particular risk to manage it.

Once you’ve calculated each risk in terms of money, effort, and perhaps time, go through them again to decide your course of action from the following four choices:

·       Avoid the risk;

·       Transfer it;

·       Mitigate the risk as possible;

·       Accept the risk.

Risk Management with Surety Bonds

Surety bonds are one of the most essential and useful tools for risk management in the construction business. They are usually known as contractor bonds or contract surety bonds and play a crucial role in protecting the project and stakeholders against financial losses, or any disruptions cause by the contractor’s failure to complete the job due to any factor.

The surety, i.e., the entity issuing the bond on behalf of the contractor, is essentially taking a guarantee for the contractor’s performance that serves as an assurance to the obligee. The bond protects not only project owners but sometimes also certain suppliers and subcontractors involved in the project.

Surety bonds essentially transfer the risk from the owner to the surety via either a bid bond, performance bond, payment bond, or warranty bond. All four are excellent ways to manage risks in a construction project.

If you’d like to apply for or learn more about surety bonds, get in touch with our expert agents. We provide construction bonds in Los Angeles. Call us to find out more.