Residential Construction Risk Management: Does It Happen in Real Life?

Risk management is a key component to successfully operate a residential construction company, whether it is a spec builder, custom home builder, or a specialized subcontractor. With each type of contractor, there are many risks that exist but differ greatly between each type of contractor. With differing risks and business strategies, methods of mitigation are also expected to vary. The research was conducted where several residential contractors were interviewed to discuss their businesses, the most important risks, and their risk management process. This was an exploratory study and did not pose a hypothesis or test relationships between variables. This research presents the thoughts and habits of homebuilders as they relate to risk management. This small sample size is not sufficient to conclude with any confidence how a specific type or size of the builder is likely to see and respond to identified risks but gives insights into the processes companies go through in evaluating risks, how they perceive certain risks, their response, and factors that go into the allocation of these risks.