Enterprise Risk Management (ERM) is a solution that can help healthcare businesses combat today’s obstacles and ultimately lower the total cost of risk for new construction. One vital tool for an ERM-centric approach is a project risk assessment.
What is Enterprise Risk Management?
ERM is a process that helps identify and manage uncertainty by implementing a unique decision-making process. This decision-making process creates a host of valuable benefits, which include the ability to anticipate, recognize, analyze and manage risks.
A basic risk management framework includes the following steps:
- Identify risks
- Measure the severity of the risks
- Mitigate the risks with the proper tools
- Implement performance measures
- Monitor the results
Project Risk Assessment Step 1: Identifying Risks
For construction projects, a project risk assessment can help lower the total cost of risk and streamline the process of insuring building projects.
The project risk assessment process begins with a review of plans and specifications (including an inspection of the job site), contract documents, and insurance policy terms and conditions.
Project Risk Assessment Step 2: Measuring Risks
Once the review process is completed, the results are charted on a risk assessment matrix, which categorizes all risks by type and measures them by severity. The matrix also includes action items and comments from the observation process.
Project Risk Assessment Step 3: Mitigation
The best approach for risk mitigation is a combination of risk reduction and risk transfer measures. Effective risk reduction measures include:
- Proactive design
- Construction measures
- Subcontractor selection
- Safety requirements
- Damage avoidance
- Monitoring measures
- Defining risk control actions
Indemnity, hold harmless and limitation of liability agreements are all examples of contractual risk mitigation strategies, while property and liability are risks that can be mitigated through insurance solutions.
Project Risk Assessment Step 4: Implementation
Timing is key when it comes to the project risk assessment process. The process should start when an organization’s legal, business development and project management teams begin the concept or pre-planning stage.
Project Risk Assessment Step 5: Monitoring
A risk assessment is an analysis of risks throughout the project lifecycle. Therefore, since risks change over time, annual reviews/audits should be conducted to adapt to any changes in the project.
Instead of managing its own risk, many healthcare organizations turn to the general contractor handling the project. This often creates sub-optimal results when compared to utilizing the methods laid out in the framework above.
The 2022 ASHRM conference is an excellent opportunity to learn more about this important topic. RCM&D’s Denise Shope and Maria Lobo, along with Berkley Construction Professional David Pacifici, will be presenting on topic of ERM and project risk assessments for healthcare construction projects. Learn more about the conference here.