Construction Site Risks: Beware These Two Hidden Perils

22 November 2018

Review your process and reduce your contractors insurance spend

No contractor wants accidents, injuries and worse happening on their sites. Healthy workers are happy workers - and good workers.

It’s a given that risk management matters, but how confident are you in your company’s processes? Unfortunately, even if the answer is “yes”, you could be setting yourself up for a fall.

No matter how well thought-out a risk management policy, ‘under-the-radar’ perils are undermining contractors’ processes, despite their best intentions.

If a contractor is feeling a false sense of security in a culture of poor risk management, the stage is being set for accidents. And, of course, consequences.

POOR RISK MANAGEMENT: THE (HUGE) COSTS

Construction risk management is big news. Large personal injury claims are on the rise. The ongoing skills shortage means inexperienced labour is being used to supplement the workforce, leading to an increased risk of accidents occurring.

Payouts for injury claims are linked to the Ogden personal injury discount rate (PIDR), which assists actuaries, lawyers and others calculate lump sum compensation levels; this rate has been in flux in recent months, with serious implications for the amounts being paid out to successful claimants.

As detailed above, the cost of health and safety investigations has risen since 2016.

And if an accident triggers an investigation from the Health and Safety Executive, a construction company could be left with serious expenses, court costs and even a criminal prosecution. 

Scrutinising its risk management – and the perils that could be undermining it – should be a regular practice for the benefit of both workers’ health and the financial wellbeing of a company.

THE HIDDEN PERILS AFFECTING RISK MANAGEMENT

#1: EGO CLASHES AND POOR COLLABORATION

When devising, implementing and maintaining risk management practices, buy-in is crucial from all levels, from management downwards.

Organisations have clearly demonstrated better safety performance when they have leaders who are willing to be engaged, adaptive and who have awareness that senior management must lead safety.

This information shouldn’t surprise anyone. But all too often it’s not the case. Despite good intentions, a collaborative approach could be lacking and it could cost a company dear.

Construction projects have varying degrees of stakeholders, each with their own willingness and resources to perform at sustainable, safe levels. Owners, trades, general contractors and construction managers all have different perspectives regarding their role in ensuring a safe working environment.

Further complexities emerge in regions where consideration needs to be given to utilising union versus non-union labour. Both of these challenges have proven to be strong elements affecting project performance.

#2: COMPLACENCY AND AN UNWILLINGNESS TO CHANGE

Companies with integrated and streamlined safety processes have a significant competitive advantage compared to those with clumsy, poorly written safety manuals.

Companies that recognise the need to have staff dedicated to manage safety do better than those that think safety “just happens”.

Punitive measures reflect the seriousness of poor risk management. But perhaps one of the biggest hindrances to adequate risk management isn’t a disregard of the law or a disrespect for good practice, but complacency. A belief from management that they’ve optimised their processes. A conviction they’re doing enough.

A humble approach is required. Companies should take the time to understand what needs to be done to have real impact on the business. There needs to be an open and honest assessment of safety processes and leadership.

Managers should ask themselves if people are held accountable for utilising the systems/processes and if not, why not. Asking why should initiate a deeper discussion concerning culture and leadership. Management needs to clearly recognise the origins of their failures around these issues.

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YOUR TWO STEP FIX:

ENCOURAGE COLLABORATION: LISTEN TO YOUR ADVISORS

Once the problem(s) has been identified, all stakeholders should work closely to find implementable solutions. Such solutions may include:

  • A change in safety personnel
  • Leadership training
  • Streamlining of processes
  • Establishing meaningful metrics
  • Initiating corrective action processes with verification and validation follow up as key steps
  • A change in management.

“Depending on the client, we can immerse ourselves into the organisation; these engagements can take up to three to six months. Or we can provide a roadmap and allow them to make adjustments independent of our involvement,” notes Chris Merrifield (Director – loss prevention/safety consulting services) of Construction Risk Partners, a JLT Group company.

“We diagnose the company’s performance using enhanced evaluation methods. Ideally, we like to spend ample time on representative projects to understand execution, conditions and culture.”

BEAT COMPLACENCY: WORK CLOSELY WITH YOUR BROKER

A company could revitalise stale, out of date risk practices by working with their insurance brokers and insurers.

In every company, there is a subtle difference in how services are managed and how characteristics of leadership affect the delivery of those services.

Larger companies or those with longer project life cycles will generally see similar inconsistent results in performance. Using tools, companies can validate their instincts, making intelligent, informed business decisions.

Consideration should be given to those actions which will have the greatest impact on the safety of the company. It may be as simple as not overlooking loyalty or acknowledging accountability - both of which have been shown to have an impact on organisational performance.

Most insurance brokers or insurers provide key loss prevention services including:

  • Site inspections identifying unsafe conditions/acts with a written report documenting any recommendations for improvements
  • Statistical analysis of losses to identify trends
  • Training.

These services have been part of the fabric of loss prevention for decades. While they are not new, they can enhance a company’s safety leadership or management. But don’t rely solely upon these methods. Companies should also work with their advisors to ensure they understand how the company identifies risk, along with their appetite to manage it.

Read more about how to reduce construction risks. 

TALK TO AN EXPERT

For further information, please contact Stephen Boddington, Managing Director of Construction, Asia at Stephen_Boddington@jltasia.com.