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3.4 Corporate Risks Versus Project Risks

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When dealing with risks for construction companies, there are two levels of risks to manage:

1 The Corporate RisksThese are the risks related to running the day-to-day business of the Contractor and they are the direct responsibility of the Corporate Management Team (under the auspices of the Board of Directors responsible for managing the company's business). Collectively, these risks extend to taking responsibility for ensuring that all the commercial and contractual provisions included in the proposed contracts for the Projects to be taken on are sound in all respects, particularly in regard to indemnities and liabilities. Those risks are extensive, but they are also not the focus of this book, primarily because the responsibility for handling such issues should fall to specialists in the area of financial and legal matters, and not to the members of the Project Implementation Teams.Sadly, however, it is often management of the corporate risks where Contractors fall down. Too often, therefore, workers have unexpectedly found themselves out of a job due to the incompetence of their Corporate Management Team and/or Board of Directors, and without any financial cushion to tide them over until a new job comes along. Worse still, it is not unknown for Directors to have received bonuses (or have still been expecting them) even as they walked away from the bankruptcy that their incompetence may well have created.4

2 The Project Implementation RisksThese are the particular risks specific to implementing each of the Projects that the Contractor is handling, and which are predominantly the responsibility of the individual Project Managers and their associated Department Managers to handle.5 Those are the risks that this book is principally focused on.

So, instead of swamping the Department Managers with information that is more related to corporate risk management concerns, I have concentrated in this book on those risks that each of the Department Managers really does need to concern himself/herself with, especially in regard to what are known as EPC/Design-Build Projects. However, as pointed out earlier, most of the risks related to both Procurement and Construction activities are common to all Projects for construction work, not just EPC/Design-Build Projects.

Practical Risk Management for EPC / Design-Build Projects

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