Contract work is an integral part of many industries and companies regularly hire vendors for all kinds of projects. The most commonly contracted work includes construction, IT, and cleaning services. For these contractors, a vital part of the operation involves ensuring client satisfaction. But since there is no guarantee of acquiring projects all the time, it is also critical for contractors to mitigate business risks for a more stable bottom line.
Risks that contractors need to avoid
Depending on your line of business, your company will be exposed to a variety of risks. These risks can range from minor to major causes of problems for the contractor and should be avoided, or at least mitigated at all costs. What are some examples of these risks?
Employee safety. The safety of your employees is a priority, especially since non-compliance to safety regulations exposes the company to legal consequences. For contractors involved in construction and other industries that heavily rely on manual labor, making sure that all safety protocols are in place is a well-regarded business practice. The worst-case scenario, when there are work-related incidents is having to pay for damages and claims. As such, it is wise for contractors to have general liability insurance in force all the time. Contractor insurance at next-insurance.com, for example, should provide general liability coverage for these circumstances.
Subpar work quality. Unmet client expectations, especially when related to work quality will damage the contractor’s reputation. Repairs and rework will cost the company money and eventually affect cash flow.
Adverse weather. Unavoidable events such as weather conditions pose a significant risk for contractors. Postponing work will cost money as well as damage resources left on the project site. Completed work may need repairs and employees will be exposed to safety risks if allowed to continue working.
Unpaid projects. There are instances when a client delays payment. This can cause problems for a contractor especially with managing cash flow.
In addition to these, many other potential risk factors can affect a contractor’s business operation. For instance, poor project management can lead to a myriad of problems such as inefficiency, unmet project deadlines, and low employee morale.
How to mitigate these risks?
In an earlier example mentioned above, one of the best practices in managing business risks is having insurance. The right coverage, such as general liability, covers workplace accidents and claims arising from damage to property. The core benefit of general liability is to protect if your business is ever found liable for anything that went wrong while contracting work for a client.
While insurance protects against one aspect of business risk, perhaps the best way to mitigate them is to understand why they occur. A clear understanding of your company’s exposure will help in devising a plan to eliminate the cause of these issues. For example, if you want to avoid delaying projects because of poor scheduling, you can use technology that will give visibility to how your project manager handles workforce schedules and timelines for completing each stage of the project.
In conclusion, risk management begins by knowing what these risks are and how they impact your company. Extensive analysis of cause and effect scenarios will greatly help in finding unique solutions that will work for your business.