In construction, risk management (RM) is often discussed as a technical process—but it’s also deeply human. How risks are identified, analysed, and responded to can make or break a project. According to Jaafari and Anderson (1995), effective risk management relies on three key stages:
Risk Identification
Risk Analysis
Risk Response
As you’ll see, approaching these stages collaboratively and using the mechanisms embedded in modern collaborative contracts can make the entire process far easier and far more effective.
1. Risk Identification: The Critical First Step
Identifying risks sounds simple, but in reality, it’s one of the hardest yet most vital stages of risk management. As Williams (1995) put it: “a risk that is not identified cannot possibly be controlled, mitigated, or managed.” Bajaj (1997) echoed this, stressing that failure to identify risks upfront leaves projects vulnerable from the outset.
So, how do we do this better?
Collaboration plays a huge role. Success often depends on the extent of cooperation between parties. One effective method is Early Contractor Involvement (ECI), where the principal contractor brings subcontractors and even the client into the conversation early. By pooling insights from all sides, the chances of spotting hidden risks increase dramatically.
2. Risk Analysis: Understanding the Impact
Once risks are identified, the next stage is analysis. This involves asking:
- How frequent is this risk likely to be?
- What timeframe could it affect?
- How significant would the impact be?
Williams (1995) and others highlight that quantifying risks is essential, not just listing them. Newer contract forms like NEC3 and JCT/CE reflect this by promoting fair allocation of risk between employer and contractor.
As Lane (2005) noted, fairer allocation leads to more realistic pricing and fewer disputes. In other words, risk analysis isn’t just about predicting problems—it’s about creating the conditions for trust and collaboration that can save both time and money.
3. Risk Response: Acting Quickly and Effectively
The final stage is about response: what happens when a risk materialises?
Collaborative contracts like NEC encourage proactive management through tools such as the Early Warning Notice process and regular progress meetings. These mechanisms push contractors and clients to share risks openly and address them promptly, rather than letting issues fester.
But here’s the part that’s often overlooked: not all risks are bad. Hillson (2002) suggests that some risks actually present opportunities. Instead of treating every risk as negative, project teams can apply four opportunity-focused responses:
- Exploit
- Share
- Enhance
- Ignore
Firms that learn to spot and act on these “positive risks” can turn uncertainty into a competitive advantage.
Collaboration and Risk: Two Sides of the Same Coin
The close relationship between collaboration and risk management cannot be overstated. Collaboration improves RM, and effective RM reinforces collaboration.
Unfortunately, many projects still treat RM as a tick-box exercise rather than a powerful driver of cost savings and project success. Done properly, it could be one of the most significant areas of impact for clients and contractors alike.
Final Thoughts
Risk management doesn’t have to be doom and gloom. With the right collaborative frameworks in place, RM can not only prevent problems but also create opportunities for growth, efficiency, and stronger partnerships.
The industry is waking up to this, but success depends on treating risk management with the respect it deserves.
References
Bajaj, J. (1997). “Analysis of contractors’ approaches to risk identification in New South Wales, Australia”, Construction Management and Economics, Vol. 15.
Hillson, D. (2002). The risk breakdown structure (RBS) as an aid to effective risk management. Fifth European Project Management Conference, Cannes, France.
Jaafari, A.C. and Anderson, J.J. (1995). “Risk assessment on development projects, the case of lost opportunities”, Australian Institute of Building Papers.
Lane, S.C. and Patrick, M.M. (2005). “The Apportionment of Risk in Construction Contracts”, Arbitration & ADR in the Construction Industry Dubai, Dubai International Arbitration Centre, Vol. 3.
Williams, P. (1995). “A regulation evaluation system: A decision support system for the building code of Australia”, Construction Management and Economics, Vol. 13.
