Data as a Risk Management Tool in Construction

High-caliber, competitive contractors have made strategic investments that help distinguish them as reliable and valuable partners. Technology is often chief among them. Of course, contractors who have made this investment are already aware of the obvious benefit of using software to keep projects on time and on budget. But many are just beginning to understand how their own data can create a flywheel that breeds a stronger safety culture and an improved risk profile in the eyes of insurers.

Because insurance is one of the top costs on a project, the most budget-minded contractors are using data strategies to reduce insurance costs and obtain broader coverage. 

Data Drives Better Outcomes in Safety & Insurance

As nebulous as it may sound, beginning a journey to use data to strengthen safety programs and improve insurance outcomes is easier than one might think. That’s because the operational data a company is already capturing can enhance understanding of their performance in relation to risk mitigation. This can reveal areas of improvement, and translating these insights into action, they can power the flywheel of reducing risk. Not only will this result in favorable insurance rates and broader coverage, but it will also create safer, more profitable projects.

With the emergence of new data that wasn’t available in decades past, the three discussed the growing significance of data-driven risk management, and how it applies not only to traditional risk management but also to performance management, financial management, and even reputation management. 

5 Key Ideas for Managing Risk Data in Construction

At HITT Contracting, we have changed the way we think about and approach our day-to-day practices, both on and off the jobsite, in a variety of ways that have brought tangible results.

1. Almost everything being collected is an indicator of risk.

When looking for data points to help assess and manage risk, start with anything captured via software that includes workflows or completion dates. Many successful risk managers look at observations, submittals, change orders, inspections, daily logs, and more. 

For example, let’s look at requests for information (RFIs). RFIs happen on every single job. When analyzing RFI data, consider when they are happening and how quickly they are being responded to. If they are taking a long time, that means there is a higher likelihood of rework and schedule delays, which increases the chance for incidents to occur. In fact, some people refer to RFIs as Risk Frequency Indicators.

These data points allow firms to see where they missing the mark and where staff can make improvements.

2. The role of the risk manager is evolving.

Historically, a risk manager’s responsibilities included purchasing insurance and managing claims. However, the modern risk manager role has moved away from “handling insurance” to becoming a trusted advisor to the C-suite. 

Risk managers are becoming an integral business partner because they have a deep understanding of revenue and exposure, and can advise on operations and strategy to bring value to the table. Access to technology and data is further accelerating this. Risk managers now have a historical view of where risk tends to creep in, and can use it to make better decisions and put practices in place so that risk management becomes proactive instead of reactive.

All that said, a good risk manager will operate in their role as if they are building guardrails — not stop signs — to keep everyone on the road where business is flowing while avoiding risk.

3. Managing risk is a shared responsibility.

Firms without a risk manager should tap into internal teams as well as external ones. By distributing risk awareness throughout the organization, everyone in the firm can become a safety champion. 

To get started, lean on the external expertise of vendors, consultants, and partners who can help train teams to identify and manage risk. Then, as the business grows, it can add a risk manager.

4. Open dialogue between the broker and underwriter is adventageous.

The insurance landscape is evolving, with some adopting an entrepreneurial approach beyond using conventional underwriting models. To take advantage of this shift, foster transparent conversations with the broker and underwriter to establish trust. 

Rather than proving someone owns a safety manual or mere box-checking, should shine a light on how internal safety practices have a tangible impact on the jobsite. Firms can contribute to the underwriting process and weave a favorable narrative by demonstrating that they have a history of efficient and effective operations, enabled by tech adoption. 

5. The future of risk management is already taking shape.

The emergence of artificial intelligence, insure-tech, risk-tech, and construction-tech is collectively enhancing safety in the construction industry. For example, AI can help identify patterns and trends so that can proactively shift operations, prioritize preventative measures and mitigate risks before they occur. Monitoring devices can track equipment and workers. Water detection devices alert when an intrusion or leak occurs.

These tools allow users to respond and intervene immediately. Digital documentation and record-keeping can also help ensure compliance. Integrating these technologies significantly reduces the chance of human error, enhances safety protocols, and reduces accidents.

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