Working in construction is often dangerous and unpredictable. Contractors face many risks in the day-to-day of their jobs, from weather delays to accidental property damage. You’ve got to be quick on your feet, able to adapt, and an excellent problem solver if you want to survive in the industry.
Creating and following a risk management plan could be a game changer for your contracting business. This strategy can help you identify workplace hazards, find ways to minimize their impact on your business and create a plan of action for worst-case scenarios.
So, where to begin? Let’s take a closer look at contracting business risk analysis, why it’s important, and creating your own risk management plan.
What is contractor risk management?
Simply put, contractor risk management is identifying, measuring, and managing the risks associated with your contracting business. It helps general contractors and sub-contractors run their businesses safely and respond to accidents, delays, and other events that may impact their work.
Contractor risk management generally falls into these categories:
- Safety – Construction site hazards that could lead to injuries or serious illness.
- Financial – Factors that may impact your cash flow, such as seasonal work stoppages, problems with the economy, or unexpected cost increases.
- Legal – Disputes arising from unfulfilled contracts, damages, or other legal issues.
- Project – Hazards that impact a project, such as poor time management or miscalculating the supplies needed for the job.
- Environmental – Floods, earthquakes, and other natural events that damage construction sites and make work impossible.
Recommended reading: How to create risk management plan for your restaurant?
Why is risk management important for contractors?
There are many reasons why you may want to make risk management a priority in your contracting business:
1. Workplace safety
Construction sites are often unpredictable places. A risk management plan can help contractors handle various ‘surprises’ that regularly pop up during building projects—from changes in the materials being used to late supply deliveries. It also serves as safety guidelines for you and your workers, helping you lower the chances of a serious injury while you work.
2. Streamline your operations
Your contractor risk management plan can help you work more efficiently. It can help you plan future projects and gives you the tools you need to avoid future risks to your business. If you know how to respond to different issues, you can save time and resources getting back on track.
3. Business growth
Finally, a risk management plan can help you grow your business. Avoiding costly mistakes and accidents helps with cash flow. Instead of paying expensive legal fees and compensation, your money can be reinvested into your business. Fewer mistakes, accidents, and delays also tend to make happy customers who will recommend your services to their colleagues.
Doing a contractor risk assessment
Every contracting business is unique. The risks your business faces may be very different to others, even contractors who are working in the same area. That is why it’s important to do a contracting business risk analysis that looks specifically at your business.
Contractor risk assessments can cover all parts of your operations, from how you work on a construction site to hiring staff. When doing your own assessment, it may help to think about things like:
- The work you do – What events could seriously impact your physical work? You may need a plan B for wet weather, missing materials, or general project delays.
- Your tools and equipment – Broken, damaged, or missing tools may do more than slow you down. Consider how quickly you could replace or repair essential equipment and how you’d pay for it.
- Sub-contractors – How do you find potential sub-contractors and check that they are reliable? Do they have their own sub-contractor risk assessment that outlines how they will respond to issues and demonstrates their professionalism?
- Workplace safety – Is everyone in your business following appropriate safety guidelines, like wearing personal protective equipment (PPE)? Safety is important on construction sites but should also be taken seriously in your office or warehouse too.
- Business administration – Think about risks to the office side of your business, such as late payments from clients, payroll issues, or a tax audit. Even an issue with your website could make it harder for new clients to find and contact you.
- Handling clients – Negative online reviews or a bad word-of-mouth gossip could sink your contracting business. Managing client expectations and resolving issues in a professional manner might help you turn a thumbs down into a regular customer.
As you can see, contracting business risks are about more than worksite injuries. There are many areas where you may need to put steps in place to minimize hazards and clean up messes when they do occur.
Capping off your plan with insurance
Your contractor risk management plan could help you avoid many events that could negatively impact your business. But it’s unlikely you’ll be able to stop them all. Accidents and mistakes happen to even the most careful contractors, and some things, like broken tools, are just part of the trade.
This is where insurance could make a difference. Business insurance creates a safety net that helps you recover from the fallout of everyday contracting risks. There are many types of coverage you might consider, including:
- General Liability – These policies (sometimes referred to as ‘slip and fall’ coverage) protect contractors against injury and property damage claims from your clients, suppliers, and other third parties that interact with your business.
- Professional Liability – These policies protect you and your company in case of a lawsuit due to alleged professional wrongdoing, including mistakes or errors in the delivery of your services.
- Business Owner’s Policy – These policies (typically shortened to BOP) combine General Liability insurance with other types of coverage in a convenient and affordable package that addresses business property damage and business interruptions.
- Workers’ Compensation – These policies provide protection for employers if an employee suffers a work-related illness or injury. Coverage may be mandatory as soon as you hire your first employee.
Choose BizInsure for your insurance needs
A contracting business risk analysis could help set your business up for greater success. By avoiding potentially expensive mistakes and accidents, you can reinvest more revenue into your business and grow your customer base. You’ll also give your staff greater confidence as they work, knowing that their safety is your number one priority.
Business insurance can be an essential part of your contractor risk management plan, and BizInsure can help you put policies in place that work for your business. In as little as 10 minutes, you could compare and buy A-rated coverage and be protected instantly.
Ready to protect your contracting business? Compare quotes online now!
**This information is a general guide only and does not take into account your objectives, financial situation or needs. Always check with your local licensing board when getting or renewing your electrician’s license to ensure you are meeting their current licensing requirements.
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