69% of companies don’t have a strategy for managing risks. As a home builder, it wouldn’t be wise to follow in their footsteps.
Home builders are at risk every day. From weather to market conditions, there’s no shortage of things that can go wrong. But with proper risk management, you can ensure that your business is financially secure for the long term. Read on for five ways to manage risk as a home builder.
1. Insure Yourself Against Unexpected Costs
Builder insurance is one of the most effective methods of managing risk. It can help you recover from unexpected costs, avoid them altogether, and even prevent financial ruin.
Insurance is a way to manage risk by transferring some of your financial responsibility to another company. You’ll pay premiums in exchange for coverage. If you have an accident or face another type of loss, they will reimburse you for the expenses related to it.
2. Review Contract Documents and Identify Risks
To mitigate risks, you need to identify them. The first step is reviewing contract documents and identifying the potential risks that could come up during construction. Potential risks include:
- The contractor not having enough money to complete their portion of the project
- A subcontractor not completing their work within a budget or on time
- A homeowner changing their mind about something during construction (or even after it’s completed)
Once you notice these risks, you can reduce them. One way to do this is by contacting a lawyer to add a home builder risk management clause to your contract.
3. Put a Process in Place for Addressing Risks
Paying attention to the risks is only half of the battle. The other half is putting a process in place that you can use when those risks come up. This can be as simple as creating a checklist for each contractor, or it can be as complex as hiring an architect and engineer to oversee the entire project.
The important thing is that all parties are clear on what needs to happen when issues arise.
4. Use Technology for Risk Mitigation
Technology provides many tools that can help you identify, assess, and mitigate risks before they become problems. For example, you can use a 3D model to visualize your project and identify where there might be issues. You can also use drones to check for building code violations and monitor the progress of construction crews.
5. Create a Communication Plan
You should have a coherent plan for how you will communicate with each party involved in your project. Listening to feedback from the people involved in a project is one way of identifying potential problems. This will also help you avoid any legal issues that could arise if you don’t communicate with your team.
Manage Risk for Your Next Project
One of the biggest risks builders face is unexpected costs. To protect yourself against this, you’ll want to develop a risk management strategy that includes insurance, contracts, and processes for addressing expenses. From there, consider using technology to help manage your company’s risks and ensure it stays protected from everything the unpredictable world might throw at it.
For more tips on how to manage risk for your next project, check out the articles in our business section. You’ll learn how to create a smart risk management plan that will help you prepare for the unexpected.