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The Top 10 Construction Risks

More than 800 construction workers die and another 137,000 are seriously injured on the job each year in the United States, according to the Department of Labor. Its a tragic number and the worst part is that so many deaths and injuries are preventable. Aside from simply being deadly, however, the industry is imperiled by as many risks as any other industry.

Aon recently documented as much in its report on the state of risk management in construction. The broker surveyed industry professionals and received at least one encouraging result: overall preparedness for the threats identified as the top 10 risks has risen from 60% in 2009 to 67% in 2011.

What are those risks? These.

Aon points out one major change over the past two years.

Damage to reputation/brand has risen significantly in ranking from 11th in 2009 to third in 2011. This change is likely to be caused by the challenges that the industry is facing in maintaining a client base in an increasingly competitive environment. Where construction firms are working hard to replace diminished backlogs, the temptation to bid work at or below cost increases. With these practices, the risk of completing the job on time and on budget also rises. This can have a negative impact on reputation. This is not indicative of the entire sector, but the pressures on margin and the ability to remain viable as the economy continues to falter will have a negative impact.

By and large, preparedness has increased across the board. With one notable, major exception: capital availability/credit risk. That isn’t so surprising, however. The industry has been crippled by the housing collapse, so profits and, thus, cash holdings are going to be low.

Perhaps more troubling is the other risk that companies are now less prepared for than they were two years ago: third party liability. I’m not smart enough to deduce the reasoning for this drop-off, nor does Aon offer any analysis, so I’ll leave it to you to speculate. Not a positive trend obviously, though.

In an ideal world, this improvement would be coming solely because everyone is finally realizing just how wonderful risk management is. But theoretical value only has so much utility in changing behavior. Instead, the economy and pressure from customers and regulators have been the driving force.

Oddly, however, construction respondents say that “natural weather events” are less of a factor than other industries do. Perhaps this is because the construction industry is more experienced when it comes to disaster losses? And it has already addressed disaster preparedness and is now “past” catching up more so than other industries? They learned the lessons of Katrina and the 2004 hurricane season and they adjusted?

I don’t know. But it strikes me as odd that construction companies haven’t felt increased pressure of late to improve in this regard following the most devastating first-half disaster-year in history. 8% seems low. But, again, I guess the economic factors trump everything.

For those that still have more preparedness to do — hint, everyone —  the Department of Labor is here to help. To promote safety, it developed a series of safety videos.

The one below centers on not getting backed over by a giant truck. Don’t let that happen is, I believe, the takeaway message they’re going for.

Risk Management Magazine and Risk Management Monitor. Copyright 2020 Risk and Insurance Management Society, Inc. All rights reserved.National Law Review, Volume I, Number 324


About this Author

Senior Editor

Jared Wade is the senior editor of Risk Management magazine and the Risk Management Monitor blog.