Risk Mitigation in Construction Project Estimates

Before we proceed, let’s define risk mitigation. Note that it is NOT the same as risk elimination.

Risk mitigation: the process of minimizing or reducing the likelihood, magnitude, or impact of potential threats or risks.

A proactive approach to risk mitigation while developing project estimates helps construction companies safeguard their assets, operations, and reputation.

Risk Mitigation: White Water Rafting Example

When you go white water rafting, these are some of the things your guide will tell you about risk mitigation: 

• Understand the potential hazards 

• Wear a life jacket and helmet 

• Use proper footwear 

• Stay aware of your surroundings

• Avoid unsafe practices like consuming alcohol or drugs

• Listen to the guide

In some locations, or on more strenuous trips, the guides add:

• Must be in good physical shape and a strong swimmer.

• Should learn to trust in themselves.

What role does a white water rafting guide play? They’re responsible for leading and ensuring the safety of a group of people during a rafting trip down the river. They must manage the raft, navigate rapids, and provide safety instructions. In addition, they help create an enjoyable experience for their guests.

Project Estimates and Risk Mitigation

When you are concerned with project estimates, your accounting advisor (your guide) will tell you these things about risk mitigation.

• Analyze financial reports and project data to identify potential financial risks

• Utilize historical project data

• Track expenses 

• Factor in potential cost increases

• Incorporate contingency reserves to cover unforeseen expenses

Here are some further things your accounting professional will advise.

• Monitor cash flow closely

• Develop cash flow forecasts

• Track invoicing and collections

• Manage accounts payable

What role does a construction-centric accounting professional play? They focus on the financial aspects of construction project estimates and provide insight into risk mitigation. In addition, they help create a profitable experience for their clients.

Three Steps to Risk Mitigation in Developing Project Estimates

Using these three steps to risk mitigation allows you to build professional project estimates. It also helps you grow your evaluation skills, gain confidence, and (of course) reduce risks.

1. Identify the risks.

2. Evaluate the potential impact.

3. Create a strategy for reducing the likelihood or severity of each risk.

Help in Developing Project Estimates With Risk Mitigation in Mind

You can leverage the expertise of the guides (the accounting professionals) at The Profit Constructors to gain a clearer understanding of the financial risks associated with your project estimates. We aim to enable you to make more informed decisions, implement effective risk mitigation strategies, and proactively manage the various financial risks inherent in the construction industry.  Call us today at 866-629-7735  to see if we’re a good fit for you.  

Ambitious Construction Contractors look to The Profit Constructors to provide advocacy in dealing with:

• Clients and customers

• Employees and subcontractors

• Vendors and service providers

• Governmental entities 

Working with The Profit Constructors gives Construction Contractors the means to organize their operations in ways that help them:

• Remain informed

• Avoid hassles

• Reduce risks

• Be future-ready

Ready for action? Or want to know more? Get in touch today to schedule a complimentary discovery call. 866-629-7735