The correlation between risk management and business expansion, at first glance, doesn’t seem apparent; however, risk management is one of the most important tactics for securing and maintaining long-lasting customer relations. In turn, these relationships, cultivated over time, also work to reduce company risk.
Reduced risk can help maintain partnerships and vice versa.
If a business can demonstrate a history of successful risk management, clients are more likely to stick around. Within the construction industry, especially, a dedication to strong risk management can even compel clients to request that a company continues to build with them as they expand into new states or regions. In the circumstance that this happens, not only is that an opportunity to grow the business, it also strengthens the backlog of repeat clients and their potential to refer.
One benefit of continued partnerships with existing clients is understanding how they operate, having already discussed, identified and solved many of the potential problems that could have been present in the past and that may still arise in future projects. Not only does the business have a preexisting understanding of the risks associated with previous clients, but the price to maintain existing clients is also additionally 30% lower than finding new ones. With every already-known variable, the risk continues to reduce. However, while preserving current clients may be a “safe” option, it’s not realistic to expand to all markets.
Risk management and new clients
All partnerships present risk, even ones that are long-established, but new clients present unique uncertainty stemming from the risks associated with the unknowns. It’s therefore the responsibility of the business to reduce this risk through risk management tactics, including identifying potential threats, implementing solution-oriented strategies and executing projects successfully. Businesses in the construction industry face distinct challenges that must be addressed and accounted for. Consequently, these companies should continually implement risk mitigation strategies, such as brainstorming, tracking risk metrics and crisis contingency planning.
What to consider before taking on a new client project?
While a “coast-to-coast” client mindset is often the basis for any construction business, companies should always examine the risks that are involved or that may arise before committing to a new client and project. Factors construction companies should consider during the decision-making process include labor market, team availability, trade partner strength and workload, material availability and escalations, state regulations on procurement and payment, political environment and design partner strength.
Once the potential risks associated with the project and expansion have been recognized, companies can work to rank and identify the risks that can be reduced, retained or transferred in an effort to make an informed decision about whether or not to pursue the project and client. When making this choice, consider whether the partnership and/or project yields high rewards for the entire team.
How can the company position risk as an opportunity for growth?
If there is a risk, it’s best not to turn away from the perceived risk. Instead, identify, analyze and proactively manage it. The best risk management teams do not rely on one employee to mitigate the challenge. Instead, risky situations can be an opportunity to leverage the team members’ knowledge. Involving the team in strategic initiatives to reduce risk increases buy-in and has a direct impact on operational efficiencies, profitability and brand.
