Risk Management & Insurance in a Volatile Construction Market
Insurance premiums for the construction industry have seen a steep incline over the past 12 months. Many firms have resorted to using credit to buy insurance. A report by Premium Credit showed the construction industry was the top sector to rely on credit for insurance.
A high-risk industry, it’s unsurprising that premiums are high. With property, physical and financial risk all involved, it is up to firms to address and mitigate potential threats.
Firms must put in place sturdy risk management policies and processes to tackle risks. From health and safety to cyber security, a keen awareness of potential areas of liability is essential.
Health and Safety
One of the primary risks in construction is the health and safety of employees. In 2020, 81,000 UK workers suffered from work-related ill-health. Nearly two-thirds suffered from musculoskeletal disorders and over a quarter suffered from stress, depression or anxiety. Almost half of all injuries were caused by falling from a height. There were 40 fatalities.
The industry has been beset by skilled labour shortages. An ageing workforce and a failure to attract younger skilled workers means inexperienced staff, resulting in more accidents and injuries.
These risks need addressing. Risk management plans should include risk assessments, proper health and safety communication, method statements and rigid health and safety policies and processes. Protecting workers, contractors and site visitors from harm is essential.
Financial Risks
Construction firms need to be aware of financial risks to put in place a plan to minimise the impact of different situations on company finances. Risk factors such as seasonal cash flow shortages, late client payments and increasing material costs can severely impact firms, leading to financial loss. Effective risk management can help mitigate such losses and put firms in a more secure position financially. Simple strategies, such as a process for following up payments, can make a big impact.
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Data Protection
The way companies handle sensitive information is coming under increasing scrutiny. Data protection risks are on the rise and no one is safe. Malware, phishing and ransomware are serious threats. Construction firms must incorporate risk management into their data handling. From client data to intellectual property and sensitive project information, firms need to ensure their data protection strategies are robust in the face of potential breaches. Employing data and privacy policies are a legal obligation. Failure to do so leads to liability claims and heavy fines.
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Environment
It’s up to construction companies to ensure the environmental risks that accompany their work are minimised as much as possible. Environmental responsibility and risk management strategies can help protect firms against claims. It’s important to consider the impact of construction projects on local people, the landscape, vegetation, soil, water, air pollution and energy use. Construction waste (especially hazardous waste) should also be correctly handled.
The occurrence of natural disasters has increased, both in frequency and severity, with many construction projects delayed as a result of flooding or heavy storms. Companies should take these risks into account, coming up with management strategies to mitigate loss in the instance of such events disrupting work.
Quality Control
In a bid to boost revenue, many construction firms are overextending themselves, taking on more than they can handle. With the UK government’s promise to build nearly 120,000 new homes, this pattern looks likely to continue. This, however, comes with a risk of poor quality projects (not to mention safety risks). Plus, with a less experienced workforce (taken on to help meet demand), companies are likely to see more defect claims.
Poor quality work comes with safety risks. And, if work isn’t up to standard, the rework costs can be crippling. Word quickly gets around. And companies accused of poor quality work will suffer reputational damage, risking future business opportunities.
Companies need effective quality control risk management policies, setting out expected standards and guarding against these problems. Such policies can cover factors such as poor quality materials or faulty workmanship, helping protect the company from claims later down the line.
Awareness of these risks is essential as the first step for construction firms who want to protect themselves and their work from claims. By putting in place solid risk management strategies and policies, companies can avoid potential problems which can be damaging to their business. Policyholders should take care when investing in insurance, working with their provider to ensure all risks are effectively addressed.
If you would like advice around risk management for the construction industry, [broker_name] in [broker_county] will be able to help. Get in touch with a member of the team today on [broker_phone]. Our team is happy to help, providing unbiased support and guidance.
