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5 Risk Management Tips You Can Bank On

Running a small business is an exercise in risk management. But risks that aren't on your radar screen can threaten your bottom line and might even put you out of business. Here are five risk-management tips that will save you money.

1. Double Check Your Assemblies
Every estimate is based on assemblies - a range of parts and fasteners all fitted together to make a whole. A drain line without a sanitary tee won't meet code, let alone eliminate the waste. Sometimes, you'll find resources missing from assemblies — important resources like parts, fasteners and even people necessary to do the work. The more you find and fix ahead of time, the lower your risk of poor quality and work stoppages.

2. Know Your Subcontractors
It's often true that your biggest risks come from other people, that's why you need to know how other people perform. That's fairly easy if you've worked with them before; otherwise, ask around. Talk to other contractors, suppliers and project owners to understand what risks they bring to your part of the project. Even if you've vetted subcontractors at bid time, what's happened since then? Are they swamped with other projects? Are they having materials or labor problems? The more you know, the more you can plan for potential disasters.

3. Create a Disaster Plan
Scrutinize insurance coverage for all the risks you can't cover yourself and keep policies updated. Don't confuse bonds with insurance. Bonds take care of others, insurance takes care of you. Accidents happen and when they do, you don't want your workers confused about how to respond. Accident and disaster plans help people quickly respond the right way. Of course, the right plan is only as good as your ability to remember it. Train everyone and practice the plan to reinforce the right response.

4. Collaborate on the Site
It's incredibly important to collaborate on a job site, especially when working with other teams and trades. The electrical outlet isn't where it should be, or the duct work is where you want your copper pipe. These everyday nuisances can be prevented through collaboration and might avoid a serious issue that could derail a project. Start processing paperwork digitally and you'll open new avenues to collaboration. Specifications, change orders and requests for information will speed through their cycles. But don't overlook the tried-and-true benefits of face-to-face meetings. Many people in construction barely tolerate texts and email and prefer face-to-face interactions, especially for critical projects.

It also helps to designate a single person, or project manager, to bring people together and make consistent decisions. A project manager can help reduce your overall risk and help complete projects on time and on budget.

5. Always Think Quality
Poor quality increases your risk of rework, and can threaten your reputation. Managing the risks related to quality should start when you prepare the bid. Quality estimates and quality planning are the first steps. After that, it's a matter of staying on top of it. If you focus on assemblies, you can minimize the overhead required for quality control. Set up checklists for completing each assembly. Then, assign someone to use the checklists when approving final assemblies. When assemblies call for inspections or system tests, include those in your approval process.

Risk management is all about pre-emptive planning. By implementing these five tips, you'll be ahead of the curve and prevent problems before they start.