"Improving Risk in the Construction Industry," Featured on SupplyChainBrain

Dexter Bachelder

Improving Risk in the Construction Industry

To read this Analyst Insight on SupplyChainBrain's site, click here.

Analyst Insight: 

Construction projects are filled with certain risks, ranging from occupational risk to construction defects and property damage to general liability. Many firms have difficulty managing these risks on an ongoing basis, and others find measuring a project’s overall risk performance impossible. Using technology to manage risk is key to mitigating any issues that might arise.

Construction companies face risks that can jeopardize a project, such as occupational risk where an injury occurs. Financial risks can pop up if companies lack sales or are faced with rising supply prices, including tariffs on building materials. Other risks can occur that deal with improper project management, not enough skilled labor to work on a job, or the occurrence of a natural disaster that damaged the job site.

To mitigate risk in their business, many contractors proactively monitor risk practices on site and have established standardized risk-management practices. Some firms have resources dedicated to risk management, and others compensate employees for managing risk.

Technology can be used to mitigate some of these risks, by performing safety-incident documentation, jobsite hazard analyses, worker certification, and employee training. Improving communication between stakeholders (suppliers, contractors, haulers, and producers) can serve to mitigate risk by having everyone on the same page. This can be accomplished by using a collaborative network that connects all trading partners, bringing visibility into what’s going on across each partner’s supply chain. Use of the data generated from transactions and communications across the collaborative network can help to identify trends and bottlenecks, uncover challenges, and find discrepancies to mitigate risk.

Collecting, analyzing, and acting upon supply-chain data helps to improve project outcomes related to budget, productivity, and profitability. Critical business data can be used to fuel continuous improvement and lead to a digital transformation. Increased knowledge promotes better decision-making.

With sufficient and accurate data, construction companies can easily compare projected profitability and efficiency with performance. Contractors can use the collected data to increase bidding accuracy by finding and calculating hidden costs. Data analysis of historical performance records can improve asset utilization. These records can include detention time, loading and unloading times, driver availability, regulations, on-time performance, and more.

To best mitigate risk, employees need to be trained. Training videos, webinars, and even virtual reality environments are useful tools to this end. Accurate documentation of incidents must be made and acted upon. Technology can uncover stopgaps in processes that need to be fixed, and can also help with decision-making and continuous improvement.


Supply chain risks aren’t going away. As more and more companies operate globally, ordering supplies and raw materials from around the world, they become subject to more risks. An increase in the budget for risk management will be needed to create better strategies that mitigate growing risks. To achieve that goal, companies will need to gain better visibility across the entire construction ecosystem supply chain, with more technology and better data-collection methods.

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