The construction industry is considered by many to be one of the riskiest fields in business. These risks can come from an internal source, like staffing changes, or an external source, like new regulations. Every risk needs to be fully assessed and a plan developed to address it before there is an impact on your bottomline.

To identify a risk, you should ask some explorative questions about your project. These questions can be something rudimentary like asking “what could go wrong?” or “what’s the worst-case scenario?” to something more refined like asking “who is accountable for a particular aspect of a project?” You will want to examine as many aspects as possible to ensure you don’t overlook a risk. Pulling up the records of similar past projects for any risks encountered or even looking online for risks associated with the type of project your about to tackle can help make sure nothing is missed.

Once you’ve identified your risks, you’ll need to evaluate them. There are two common measurements for this; the severity of the risk and the likelihood of the risk occurring. The severity of a risk is an indication of how much financial or reputational damage the risk will cause if it were to occur. The likelihood of a risk occurring is the estimated level of probability of an impact that affects the project. Ranking each measurement from low impact to high impact can help you determine how to allocate your resources into how you want to manage the risk.

The easiest way to keep track of all the different identified risks and to start planning how to respond to them is to employ a construction management software that has powerful analytical tools. Combined with a data capture module, you’ll be able to customize your KPIs (key performance indicators) to focus on the different risks associated with your project. Designing a dashboard for identifying early warning signs of a risk to the project will help drastically to increase your reaction time to keep the project on time and profitable.

After you have identified and tracked your risks, you’ll want to go through them and evaluate what kind of actionable plan you want for each risk. There are several broad categories that a risk response will fall under. Avoiding or mitigating a risk is the most frequently used tactic in responding to a risk. This involves changing your strategy to either avoid a risk entirely or reducing the severity or likelihood of the risk. Transferring a risk is the act of transferring the risk to a third party. This usually takes the form of insurance against something like a fire or theft.

Your company or stockholders might also choose to accept the risk of a project. Ultimately the construction industry has grown by taking the occasional risk to achieve greater profits and test the capabilities of the company. No matter how you approach the risk, it’s important to always have a contingency plan in place. A good contingency plan will include any event that might disrupt operations and provides clear directions on how to put it in motion. This can be as simple as having a backup of your data in case of a server failure to identifying non-critical activities in the project that can be paused to focus on rectifying a problem.

One thing to keep in mind about risk management is to not become overconfident or complacent in the procedures you have setup. Regularly audit your process to make sure that everyone involved knows what their role is if they encounter a risk and update your risk detection dashboard with new risks as you become aware of them.

In June 2014, Mark Liss was appointed president of the Explorer Software Group. He oversees the Eclipse, Pivot, Versyss, TCMS, ezDocs, TrueLine, and Shafers products.