Most contractors recognize that the construction industry involves significant risks. Companies must engage in smart risk management processes to reduce their exposure and avoid or reduce some of their risks to protect their business operations. Both general contractors and subcontractors must mitigate risks before they agree to take on work on a project. Certain risks, including operational risks and others, can be difficult to predict and might be experienced by all of the parties involved in a project.

Some of the common types of risks contractors face include supply chain risks, natural disasters, technical risks, transportation logistics risks, equipment availability risks, labor availability risks, management risks, economic/financial risks, workplace injury accident risks, thefts, and more. Before you take on a project, you need to identify the risks you will face and take strategies to mitigate them. Here are some ways you can mitigate risks in the projects you take on.


Before you agree to perform work on a project, you need to analyze it to identify all of the risks that might arise. If you don’t take the time to identify the risks, you won’t be able to effectively manage them.


After you have identified the risks of a project, you should then place them in order of priority based on the likelihood they will occur and the degree of harm they would cause if they do. When you do this, you can then prioritize the greatest risks and plan how to tackle them.


One type of common risk faced by subcontractors on construction projects is the risk of non-payment. If you are a subcontractor who is considering a project, the risk that you won’t be paid by the general contractor for your work should be addressed. While you can file a mechanic’s lien against the project owner’s property, a better way to handle this type of risk is to make sure the general contractor has a payment bond. Contractors’ bonding might include several types of bonds to protect others from harm. A payment bond guarantees that subcontractors and suppliers will be paid for their work on time, helping you to avoid the mechanic’s lien process if you aren’t paid.


You must also make sure that you have sufficient insurance coverage to protect you against the types of risks you might face while working on a project. Two types of insurance policies you should have include commercial liability insurance and workers’ compensation insurance. These types of policies can protect you against losses caused by accidents on the worksite.


You should have a standard set of procedures and steps in place to mitigate risks. While the risks you will face will vary based on the projects, having a standard set of procedures can guide you through the risk management process so that you can more easily identify and evaluate risks. There are multiple software options that can be used to help with this process.


Making sure you keep open lines of communication with all of the stakeholders involved in the project throughout its life is critical for both avoiding risks and responding to those that can’t be avoided. Communication allows you to keep everyone on track and up-to-date with changes as they occur. It also helps each involved party to understand the potential risks and the steps that they must take to avoid them.


As a contractor, you must comply with numerous safety regulations that are enforced by the OSHA. If you fail to comply with safety requirements, you could face heightened risks of serious workplace accidents, substantial penalties from OSHA, and substantial liability. Make sure to know the safety regulations that govern your business. Make sure your employees are thoroughly trained and have the safety equipment they need to perform their jobs. You should also have steps in place to ensure employees comply with wearing their safety gear and engaging in other safe practices on the worksite, including potential discipline if they fail to do so.


You should have a system in place to store all of the documents, emails, and reports in a single place so that they can easily be accessed whenever you need to refer to them. A good document storage and retention system can help to protect you against potential litigation and keep better track of your projects. A good document storage and retention system also help when it’s time to file taxes, renew your license, or renew your bond.


An important way to mitigate risks is to have good quality control measures in place. During the project, you should have a designated supervisor perform regular quality checks. It is much easier to fix something during the construction process than later after the project is completed. Quality control measures can also help to reduce the risk that a construction defect claim might be filed against you in the future once a defect is discovered. Quality control helps to ensure that you and all of the workers who are performing work on the project are following their requirements under the contract.


If you worry too much about risks, you might end up missing out on potentially lucrative contracts. Instead, you should learn how to assess risks and evaluate projects so that you understand when the potential rewards outweigh the risks vs. when you should pass on a potential project. Properly evaluating risks should help you identify risks that can’t be avoided so that you can determine whether taking on the project is worthwhile. It can also help you to implement strategies to reduce risks on projects that offer more benefits than disadvantages so that you can increase your profits.


Risk management is a key component of growing your business as a contractor. By implementing strategies to reduce the risks you might face on a project, you can be better prepared to handle them when they arise. 

Being ready with processes in place is a good way to reduce risk. Risk is part of business; best to be prepared. 

About the Author:

Eric Weisbrot is the chief marketing officer of JW Surety Bonds. With years of experience in the surety industry, he is also a contributing author to the surety bond blog. He has held a range of different roles within the surety industry, from agent assistant to bond issuer, which gives him a unique insider perspective on surety related topics. For more, visit

Modern Contractor Solutions, October 2022
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