Common Risks Contractors Bring to a Business


Hiring contractors to complete construction and maintenance work is common, which means the contractor and client relationship is an important one.  This relationship allows client companies to bring in expert contractors, with a trained and efficient workforce, to complete projects in the most cost-effective manner to achieve their business goals.  Often overlooked is the inherent risk that contractors present to your business.  The failure to properly identify and manage this risk can be detrimental.

Here are some common risks organizations need to be aware of:

  • Legal costs. Legal and regulatory obligations can lead to contract risks and litigation can being brought against an organization.
  • Liability costs. Expenses include damages or medical payments because of bodily injury or property damage caused by or relating to a contractor’s work.
  • Regulatory fines. This includes but is not limited to OSHA citations, EPA violations, and local ordinance violations.
  • Safety and health hazards. Depending on the scope of a project, a variety of safety and health hazards are common.
  • Property damage. Damage to buildings, products, equipment, vehicles, and materials, can result from construction activities.
  • Hazards to the public. Construction activities can increase hazards to the public.  Some of these hazards include excessive noise, moving equipment, falling objects, open holes, trash and debris, and hazardous materials and chemicals.
  • Production loss. Construction activities can impact your production.  Loss can be caused by process shutdowns, serious incidents, and damage to your facilities and equipment, and project delays.
  • Project delays. Poor planning and unforeseen problems can arise when schedules are not adhered to which lead to project delays.  These delays, in turn, lead to increased project costs and hinder the receipt of project benefits.
  • Public relations. Community stewardship and company reputation are two things most organizations heavily invest in.  Negative or perceived negative impacts of a project on surrounding neighborhoods or businesses, are not in a company’s best interest.

Risk management tools, such as prequalification, can help effectively address and reduce the exposure to these risks.  Managing contractors can be complex, burdensome, and challenging.

Utilizing a third party, like Appruv, has become the preferred method to implement a prequalification program because of the ease of use, expertise in the complex process, cost effectiveness, and reduction of in-house burden.  Regardless of how you choose to conduct the program, it is important that there is a dedicated investment up front to develop an effective prequalification process that is standardized, efficient, and easily accessible.  Contact Appruv today to learn more!

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