Construction companies are pursuing new technologies and processes to drive efficiency, improve safety, and increase productivity. However, several issues may challenge growth. Explore key trends driving risk in the construction sector, from managing substance use disorders and natural disasters to creating more inclusive work environments for women.
The Construction Risk Matrix featuring 11 key trends
The Risk Matrix, produced by the editorial team at Risk & Insurance®, plots critical issues affecting the construction industry based on frequency and impact.
Substance use disorders
While opioid misuse and prescription drug addiction continue to challenge a number of industries, employees in construction have a 60% higher rate of substance use disorders than the national average. This is due to several factors. Construction is a primarily male-dominated industry and studies have found that men account for 67% of workers who have substance use disorders. Further, the physical demands of a job in construction increase the likelihood of wear-and-tear injuries.
Growth and productivity
An executive summary from the McKinsey Global Institute shows that the construction industry lags significantly behind other industries in both growth and productivity. But there is hope yet: If the industry boosted its productivity to match the rest of the economy, it could increase its annual value by $1.6 trillion. Investing in technology and digitization, focusing on attracting and maintaining a strong workforce, and utilizing mass production when available are just a few ways to start.
While more women are pursuing careers in construction, they accounted for only 9.9% of the industry’s workforce in 2018. With the construction industry expected to grow by 3% in 2020 and the potential to create nearly 2 million new jobs by 2021, more companies are looking to recruit women into the field. However, to be successful, construction companies must address several barriers. For example, ill-fitting personal protective equipment, inadequate training, and lack of sanitary facilities continue to present health and safety hazards for women workers, putting them at elevated risk of injury while on the job.
Construction defect claims are some of the most common — and costly — type of disputes brought against general contractors. In fact, 75% of construction industry players reported experiencing a claim or dispute in the last five years, with the most common being defect claims. These types of claims can happen on projects of all types and sizes, arising from complaints over failure to design or construct a build in a manner considered reasonable by the owner. But there are ways to protect against such claims, such as establishing contractual protections, clarifying roles and legal contracts, and maintaining a robust quality control program.
There is a nationwide shortage of skilled labor in the construction industry, driving up costs and lengthening the time it takes to complete projects. In fact, 80% of construction firms said they are having trouble filling qualified hourly craft positions according to a recent report by Associated General Contractors of America. As a result, many firms are offering better pay rates and benefits to attract workers. Others are offering apprenticeships to at-risk youth, women, and veterans to help fill future labor shortages.
Because of increased demand, general contractors and subcontractors may take on a greater number of projects or larger value projects. However, without proper planning, construction firms may find themselves overextended and without the capacity to manage their projects effectively. According to findings on why contractors fail from Surety & Fidelity Association of America, unrealistic growth — which includes overextension —is ranked the highest at 37%. Overextension can result in a variety of risks, including site accidents and injuries, defects, and litigation.
As natural catastrophes grow in number and severity, construction sites face extended delays, rainy and wet conditions, and damages. Data shows that just in the last few years, businesses across the U.S. have lost billions to hurricanes, wildfires, and other disasters. With climate-related risks on the rise, more emphasis is bound to be placed on building condition, age, and construction materials.
A well-lit, fenced in construction site is less likely to be vandalized than one with nothing guarding it. Unfortunately, not all sites will have extensive security during its off hours, and unattended projects are vulnerable to damage and vandalism. Companies could lose up to $1 billion annually from theft or vandalism of equipment alone.
Design-build project delivery
Design-build project delivery, a method in which the design and construction services are contracted by a single entity, is expected to represent nearly half of construction spending by 2021. But this approach can open contractors to additional liability not experienced under more traditional delivery methods.
The popularity of wearables is continuing to spread across industries, and construction is no different. Potential applications include monitoring employee movement or vitals and alerting employees if work conditions become dangerous. For example, smart helmets can detect a worker’s level of fatigue or a worksite’s carbon monoxide levels while augmented-reality glasses can provide workers with real-time instruction on how to operate equipment. These technological advances are expected to have a positive impact on worker safety, but more research is needed to prove the effectiveness of wearables at preventing injury.
Drones bring exciting innovation to the construction industry, providing major time, cost, and safety benefits to a variety of workflows, from site mapping to structural inspections. In fact, nearly 40% of construction companies are using drones today.. But onboarding new technology — especially one that flies — adds new risks. For example, contractors must stay abreast of a host of safety practices, compliance regulations, and privacy guidelines. Understanding regulations, having a designated drone manager, and implementing a drone safety plan can go a long way in mitigating risk and maintaining a safe worksite.
The Risk Matrix is featured with the permission of Risk & Insurance®. The Risk Matrix is produced by the Risk & Insurance editorial team.
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