Project Risk Management Procedure

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: Project Managers, Estimating, Executives

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Purpose

Establish procedures for identifying, assessing, and managing project risks.

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Risk Management Process

Identify → Assess → Plan Response → Monitor → Update

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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

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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?

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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

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Risk Register

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              PROJECT RISK REGISTER
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Project: ___________________________________________________

Date: _____________________________________________________

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| ID | Risk Description | Category | Prob | Impact | Score | Response | Owner | Status |
|----|------------------|----------|------|--------|-------|----------|-------|--------|
| R1 |                  |          |      |        |       |          |       |        |
| R2 |                  |          |      |        |       |          |       |        |
| R3 |                  |          |      |        |       |          |       |        |

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RESPONSE TYPES:
- Avoid: Eliminate the risk
- Mitigate: Reduce probability or impact
- Transfer: Insurance, subcontract
- Accept: Acknowledge and monitor

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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

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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

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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

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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

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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

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Related Documents

• Bid Pursuit (Go/No-Go)
• Estimating Standards
• Change Order Management
• Claims Procedures

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Template provided by support.construction. Proactive risk management protects projects.