Project Risk Management Procedure
Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: Project Managers, Estimating, Executives
Purpose
Establish procedures for identifying, assessing, and managing project risks.
Risk Management Process
Identify → Assess → Plan Response → Monitor → Update
Risk Categories
Schedule Risks:
- Weather delays
- Permitting delays
- Long-lead items
- Subcontractor availability
- Inspections
- Owner decisions
Cost Risks:
- Material price escalation
- Labor productivity
- Scope creep
- Change orders
- Claims
- Unforeseen conditions
Quality Risks:
- Design errors
- Workmanship issues
- Material defects
- Inspection failures
Safety Risks:
- Site hazards
- High-risk activities
- Subcontractor safety culture
External Risks:
- Regulatory changes
- Market conditions
- Weather/natural events
- Supply chain
- Economic conditions
Risk Identification
Sources:
- Project documents review
- Site investigation
- Lessons learned (similar projects)
- Team brainstorming
- Subcontractor input
- Owner discussions
Questions to Ask:
- What could go wrong?
- What has gone wrong before?
- What is unique about this project?
- What are the unknowns?
- What depends on others?
Risk Assessment Matrix
Probability:
| Level | Description | Likelihood |
|---|---|---|
| 5 | Almost certain | over 90% |
| 4 | Likely | 60-90% |
| 3 | Possible | 30-60% |
| 2 | Unlikely | 10-30% |
| 1 | Rare | under 10% |
Impact:
| Level | Schedule | Cost | Description |
|---|---|---|---|
| 5 | over 2 months | over 15% | Critical |
| 4 | 1-2 months | 10-15% | Major |
| 3 | 2-4 weeks | 5-10% | Moderate |
| 2 | 1-2 weeks | 2-5% | Minor |
| 1 | under 1 week | under 2% | Negligible |
Risk Score:
Risk Score = Probability × Impact
| Score | Risk Level | Action |
|---|---|---|
| 15-25 | Critical | Immediate attention |
| 8-14 | High | Active management |
| 4-7 | Medium | Monitor closely |
| 1-3 | Low | Accept or monitor |
Risk Register
================================================================
PROJECT RISK REGISTER
================================================================
Project: ___________________________________________________
Date: _____________________________________________________
================================================================
| ID | Risk Description | Category | Prob | Impact | Score | Response | Owner | Status |
|----|------------------|----------|------|--------|-------|----------|-------|--------|
| R1 | | | | | | | | |
| R2 | | | | | | | | |
| R3 | | | | | | | | |
================================================================
RESPONSE TYPES:
- Avoid: Eliminate the risk
- Mitigate: Reduce probability or impact
- Transfer: Insurance, subcontract
- Accept: Acknowledge and monitor
================================================================
Risk Response Strategies
Avoid:
- Change approach
- Eliminate cause
- Different scope/method
Mitigate:
- Early procurement
- Additional resources
- Contingency planning
- Quality controls
Transfer:
- Insurance
- Subcontract (shifts to others)
- Performance bonds
- Contract terms
Accept:
- Acknowledge risk exists
- Budget contingency
- Monitor for occurrence
Common Construction Risks and Responses
| Risk | Response Options |
|---|---|
| Material escalation | Lock pricing early, allowances, escalation clause |
| Weather | Schedule buffer, weather contingency, covered work |
| Subsurface conditions | Geotechnical study, contingency, differing conditions clause |
| Permitting delays | Early submittal, pre-application meetings, float |
| Design errors | RFI process, constructability review, contingency |
| Labor shortage | Early recruitment, pre-hire, multiple sources |
| Subcontractor default | Prequalification, bonds, backup subs |
| Owner changes | Change order process, document all directions |
Risk Monitoring
Regular Reviews:
- Weekly (active risks)
- Monthly (all risks)
- Major milestones
- When conditions change
Track:
- Risk status
- New risks
- Closed risks
- Effectiveness of responses
Risk Contingency
Budget Contingency:
| Risk Level | Contingency |
|---|---|
| Low risk project | 2-3% |
| Medium risk | 5-7% |
| High risk | 8-10%+ |
Schedule Contingency:
- Add float for high-risk activities
- Buffer before milestones
- Reasonable overall duration
Risk Communication
Communicate Risks To:
- Project team
- Management
- Owner (as appropriate)
- Subcontractors (their risks)
Risk Escalation:
- Critical risks → Executive attention
- Budget impacts → Finance
- Schedule impacts → Operations
Related Documents
- Bid Pursuit (Go/No-Go)
- Estimating Standards
- Change Order Management
- Claims Procedures
Template provided by support.construction. Proactive risk management protects projects.