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Risk mitigation (also known as risk management) is an area that should be addressed during every phase of construction, from pre-planning to final inspections.
George Casey of the homebuilding firm Saussy Burbank Inc. (Charlotte, N.C.) points out that risk mitigation is a set of practices that over time reduces the risks resulting from doing things wrong. "The evolving best practices we're seeing in the industry right now are that [high-quality] builders have consistent systems that ensure quality, and they have happy customers, essentially meaning that the probability of lawsuits will at least be reduced. It's a win-win."
Here are just a few examples of steps that should be taken in the risk mitigation process:
Builders should have a set of internal checklists dealing with every phase of construction. Each item on these checklists should be completed before the next phase of construction is begun. For example, if you side a house before all of the flashing is properly installed, it could lead to rot, mildew and other problems -- which could then lead to a lawsuit. This practice supports the old builders' rule of thumb, "Never consciously put good work over bad."
Another step in risk mitigation: Train trade contractors to spot incomplete or shoddy work. For example, if a drywall tradesman sees a duct that hasn't been properly taped before he begins the drywall phase, he should inform the supervisor of this problem. Properly taped ducts prevent leaks; improperly taped ducts not only decrease energy efficiency but also could cause condensation, which could lead to mildew and rot.
Another very important example of risk mitigation is to have a third-party inspector do a thorough testing and analysis of all of the critical pieces of construction. Building inspectors from the local jurisdiction are only concerned with structural flaws, not performance. But your third-party inspector might run a series of tests to analyze the air quality in a home for volatile organic compounds (VOCs), mold and other impurities. If you don't test for such substances and a homeowner later experiences health problems from them, legal problems are likely to follow for the builder.
"Builders almost always have to carry what's called builder's risk insurance, which protects against things going wrong -- for damages that come from building a home incorrectly," George says. "And that insurance has become more expensive over time."
This insurance is like auto or health insurance: The bigger the risk, the more expensive your policy will be. And failure to take take adequate risk-mitigation steps could increase your premium costs -- as well as the potential for lawsuits and overall customer dissatisfaction.
"Risk mitigation is an issue all builders have to deal with," George says. "If you can ensure that a house is built correctly the first time, you will automatically reduce risk."
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