Chapter 3 Managing Risk PDF

# Chapter 3 Managing Risk ## Chapter Survey... * Risk Management Benefits * Insurance * Property Insurance * Liability Insurance * Business Owner's Policies (BOPs) * Automobile Insurance * Burglary and Theft Insurance * Key Person Disability Life Insurance * Coverage Gaps and Overlaps * Employment...

# Chapter 3 Managing Risk ## Chapter Survey... * Risk Management Benefits * Insurance * Property Insurance * Liability Insurance * Business Owner's Policies (BOPs) * Automobile Insurance * Burglary and Theft Insurance * Key Person Disability Life Insurance * Coverage Gaps and Overlaps * Employment-Related Insurance * Insurance Coverage for Subcontractors * What is a Bond? * Bond Language * Types of Bonds * Qualifying for a Bond * Bond Claims * Laws Governing Bonding of * Federal Construction Projects Managing risk can be one of the biggest challenges you'll face in the construction industry. The weather, site conditions, customer changes, and employees can be just a few of the unpredictable factors in a job. Some of the risks are preventable and others can be minimized. Risk assessment is one of the most important steps in the risk management process. You must determine the probability of loss occurring and the consequences if the loss occurs. Your approach to a risk with the potential for a large loss and a low probability of occurring is handled differently from a risk with a potential for minimum loss but a high likelihood of occurring. Potential risk must be examined on both a project and overall business basis. Future chapters will focus on the skills you need to assess, manage, and ultimately protect yourself against risks for certain situations, such as environmental and safety risks. ## Risk Management Benefits Unmanaged risk can harm your business, resulting in financial loss, lower profit margins, and unnecessary liabilities. Risk management involves assessing all areas of your business from operations to administrative functions. Good risk management provides several benefits that can affect your reputation and bottom line: * Lower business and liability insurance premiums * Reduce chances of being sued * Improve chances of prevailing in a lawsuit Risk is managed in several ways. There may be provisions added to a contract to reduce your risk (discussed in Chapter 7) or safety programs or operating procedures can be put in place. Other risks can be minimized through insurance coverage and bonding, which will be discussed in this chapter. ## Insurance While some risks can be minimized, others are uncontrollable. Insurance is a way to supplement your risk management program to protect your business against unforeseen events, such as accidents and theft. Without it, you could lose your business in a lawsuit as a result of one bad accident. The less coverage your business has, the more risk you assume. As you increase coverage, you reduce your risk. **Insurance Defined:** Insurance is a protective measure in which coverage is obtained for a specific risk (or set of risks) through a contract. In this contract or policy, one party indemnifies another against specified loss in return for premiums paid. Indemnity is a way to