Why risk management should be construction companies’ priority
Besides being an effective control mechanism, managing risk should be of priority consideration for the construction industry as a whole and for construction companies in particular.
Risk, like challenges, are inseparable from existence. So, all businesses and organizations face the risk of unexpected events such as natural disasters, machinery failure, staff and third party accidents, or loss of funds through theft.
Many organizations disregard or under-estimate the importance of a proper risk management culture. It has been observed that majority of businesses lack a formalized risk management assessment and control procedure even as risk management is a necessary element for organizational effectiveness.
Risks are generally unforeseen events that cost organizations a lot of money or disrupt the smooth running of activities in those organization. The process of identifying the sources of these risk factors, analyzing, controlling, tackling, dealing with and managing the uncertainties in a manner that minimizes negative outcomes is known as risk management.
A proper understanding of the risks facing a business can be the difference between continuity and failure. Reputable and thriving organizations, especially construction companies don’t take this aaspect of their operations for granted. They believe that risk management protects the operations of an organization at a global and local level.
Experts explain that this is why it is essential that organizations create proactive measures that will help them avoid or minimize potential crises, noting that when organizations adopt risk management procedures, the safety of valuable resources such as time, income, assets, people and properties is guaranteed.
Historically, the Nigerian construction industry has been prone to risks ranging from poor record of completion, high cost and extended time to high levels of disputes and litigation, pressure on health and safety provisions, low margins and profit risk, and poor safety and occupational health record.
Expectation is that the high-risk nature of this industry would make the stakeholders adopt a standard risk control and management procedure, but sadly, this is not the case in most companies.
There are, however, a few companies making efforts to establish procedures to minimize risks and reduce its detrimental effects; and one of such companies is ITB Nigeria Limited which, according to its officials, strives to achieve ‘zero accidents’ by instilling a strong safety culture in its workers.
Part of this safety culture is the risk assessment of all areas of construction work which, in turn, provides sufficient information, instruction, training and supervision to its workers. It also leverages technology to ensure that work between the office and project sites are properly coordinated.
To further control risks, ITB Nigeria instills a strong safety culture through the exemplary leadership of site management, full participation of workers in HSE and clearly defined roles and responsibilities. The Company makes effort to minimize the impact of its activities on the environment through pollution prevention, reduction of natural resource consumption and emissions and reduction of waste. ITB has an HSE management system that is continually being strengthened through improved procedures and through total compliance with applicable laws and regulations.
Like anywhere else in the world, the construction industry in Nigeria is highly risk prone, with complex and dynamic project environments creating an atmosphere of high uncertainty and risk. The industry is vulnerable to various technical, sociopolitical and business risks.
As a result, the people working in the industry bear various failures, such as, failure of abiding by quality and operational requirements, cost overruns and uncertain delays in project completion. In the light of this, it is important that every construction company sets up an effective system for risk assessment and management.
Officials of ITB Nigeria are of the view that the effects of a poor or non-existent risk management culture on business reputation and integrity is quite overwhelming. Therefore, organizations must ensure that they carry out the four common steps in the risk management cycle which include assessment, evaluation of risk, risk management and measurement of impact.
“Risk management is an integral part of managing a business. Companies that have active risk management programmes in place are better poised to deal with crises than other companies that have not yet embraced the advantages of risk management”, they maintained.
CHUKA UROKO