Accidents on site have been identified as the most serious risk to the survival of a building business according to participants at this year’s ITM Training Days.

The results were compiled during Builtin’s risk management workshops over the four days covering Auckland, Christchurch, Hamilton & Palmerston North. Almost 1,000 builders, ranging from individual LBPs to owners of large construction businesses, were asked to identify the top 5 risks that would impact the survivability of their business.

Aside from the physical and emotional trauma that arises from a serious incident, the financial impact of a site being shut down while an accident is investigated, and the potential time and money involved in any resulting WorkSafe prosecution, weighs heavily on businesses and their owners.

From a risk management perspective, both the health & safety obligations on builders and the support systems available are extensive. As the greatest risk identified by builders this should, and in most cases rightly does, attract the most focus from construction businesses.

Customers not paying or cancelling jobs came second on the list. Participants felt that while this was relatively rare, if and when it occurred it could have a significant adverse impact on their financial position.

There is also a good amount of legislative support for builders to mitigate bad debt risk, in the form of the Construction Contracts Act and the payment claim/payment schedule system. There is also a wide availability of professionally drafted standard form contracts, escrow services and other mechanisms to ensure prompt payment and minimise disputes. However, unlike health & safety, these are often not well utilised by builders, leaving them exposed to a significant area of risk without good risk mitigation practices in place. Insurance is typically not available to cover this risk, except for larger businesses where trade credit insurance becomes an option.

Third was the impact of heavy weather and natural disasters. While the destruction caused by Cyclone Gabrielle and the flooding in large parts of Auckland in early 2023 is still relatively recent, it was participants in Christchurch that ranked natural disaster as the greater risk. Accidental property damage by staff (Auckland), the availability and reliability of staff (Hamilton) and theft of tools (both Palmerston North & Auckland) were seen as greater risks.

Damage and losses caused by weather and natural disasters are areas where insurance can traditionally help to reduce the financial impact on a business. The same applies to both accidental damage caused by workers and theft of tools.

Staffing is another area which is heavily legislated, but not necessarily in the employer’s favour. It’s also not an area where insurance can typically help with reducing the financial cost of issues caused by workers (except in the case of employment disputes or liability for illness/injury).

At a total level, the top 5 risks represented over half of all responses. This tells us unsurprisingly that builders nationwide have very similar risks. However, there is some local variation.

The responses, compiled via a series of focus groups, also asked participants to identify solutions to mitigate the risks they identified. None of these solutions will be a surprise to anyone, it’s not rocket science. Unfortunately, it’s the putting into practice of effective risk mitigation strategies where builders typically fall down. From our experience this usually comes down to the time involved, the fact that the work required is often outside a builder’s skill set and comfort zone, or they have a poor appreciation of the cost-benefit return from investing in risk mitigation measures.

Builtin’s Construction Risk Management Programme aims to change this. By making it affordable and easy for builders to create and maintain their own risk register, Builtin’s goal is that builders will be able to take a more structured approach to managing their risks. The programme involves an initial risk assessment workshop with business owners and key staff, where key risks are identified, quantified and mitigation measures developed (if they don’t already exist).

This also helps business owners to identify and close gaps in their existing risk management practices. An easy-to-use, affordable online portal then allows the business to assign owners to each risk, with regular review dates scheduled, so that nothing falls through the cracks.

Find out more and register your interest here: www.builtin.co.nz/risk

Use Builtin’s risk checklist to audit your next project: www.builtin.co.nz/key-risks-checklist

The top 20 risks identified by participants at ITM’s LBP Training Days in 2024: