Trust and Risk Mitigation in Construction

Trust and Risk Mitigation in Construction

Editor’s note: Our social calendar (including blog posts) is scheduled weeks (sometimes months) in advance. The following post was written over a month ago and “calendared” at that time. In other words, we did not plan this post to coincide with the Coronavirus scare and reaction. But it has proven to be well-timed.

Trust is about taking risks

I learned of some folks who took in a young foster care child who had been abused by his parents. He was unwilling to trust. He couldn’t trust anyone or anything in the world he inhabited. His mistrust of life was so deep-seated it even included simple addition. No matter how many times his care family showed him that two apples plus two apples always equaled four apples, his response was, “What if it doesn’t equal four the next time I try it?”

This story broke my heart when I first heard it, and thinking of it now still saddens me.

Trust is a basic tenant on which we all make it through each day. From the floors we stand on, to the chairs we sit in, to the mugs we pour our hot drinks in, we trust they will continue to do their jobs. Yet, there are those times they don’t.

For example, you trust that when the traffic light is green one way, it is red the other. Further, you trust that when the light is red for the cross-traffic, the drivers in that lane will stop. And this sometimes leads to trusting that the ambulance drivers will take you to the nearest (or best) medical facility.

Every day, we get up, and without thinking about it, we trust. But sometimes we realize we must verify before we continue to trust.

Verification is about risk mitigation

From the products you purchase to the services you take advantage of, to the people you hire, there are ways to verify if you’re likely to receive that which you desire. A prudent verification process is essential.

It can be as simple as looking for the number of stars other users have given a retail item or as difficult as checking a doctor’s background and credentials.

In the end, verification allows you to eliminate, reduce, or control the impact of known risks.

Because our practice consists of management accounting, we advise commercial construction subcontractors to protect themselves from data fiascos through the process of risk mitigation.

Risk mitigation through contingency planning

There are multiple ways to lose data, such as fire, storms, cyber-attacks, employee theft, and beyond.

The key to developing a good plan is to focus on possible losses rather than events.


Think in terms of which data takes priority. What would cause the most pain if lost? With this understanding in mind, here are a few items for you to consider while developing your data contingency plan.


  • Rank which data are most important
  • Review data back-up and storage procedures
  • Find back-up service providers (you may find this article helpful)
  • Develop a back-up procedures manual
  • Secure outside support for payroll or other financial issues


Remember to include client and employee management strategies to be used during a crisis when developing your back-up procedures manual.

Risk mitigation through back-up

The goal is to establish data back-up systems to protect critical documents.

Remember when someone pointed out you were comparing apples to oranges rather than apples to apples? Yep, that sometimes happens. And the simple solution is to remove the oranges as you make your decision based only on apples. If only it were that easy when trying to determine which method or service to use for backing up your data.

It turns out that deciding between your back-up options is more along the line of comparing tacos to tacos. Do you prefer street tacos? How about deep-fried tacos or fast food tacos? Do you want to sit and enjoy handcrafted tacos?

The plethora of options can tend to get in the way until you determine the specific needs of your construction company’s data back-up and recovery needs. Which tastes better to you? How much time do you have available? Does location matter? Does the price make a difference?

Further, back-up is not the only piece of the equation. Fast recovery of all that backed up data is important. The point is to quickly put everyone back in touch with the information that’s needed.

Risk mitigation through insurance

You already insure your building, equipment, vehicles, life, and health. It only makes sense that you use insurance for the data you have stored in the cloud. In an article posted on The Balance Small Business, it is stated, “Cyber liability policies protect your business from claims and expenses resulting from a data breach.” The article, What Does a Cyber Liability Policy Cover? explains various components and aspects you need to look for and consider when purchasing this type of insurance.

You can check to see if your present provider offers cyber liability protection, or you can purchase this insurance as a stand-alone product.

Risk mitigation through checks and balances

Finally, as management accounting specialists, we advise contractors to mitigate risk with the simple process of checks and balances. Following is a list of checks and balances you may wish to consider for your construction company.

  • Use a system of double-signature requirements for checks, invoices, and payables.
  • Make use of the services of an accounting firm and the different services of a tax preparer.
  • Provide multi-department authorization for final figures.
  • Separate handling responsibilities from record-keeping functions and purchasing responsibilities from payables functions.
  • Before payroll preparation, require supervisors to approve employees’ timesheets. (Or automate time tracking for accurate timesheets using an app such as ClockShark)

A couple of other ways you can mitigate internal risks are:

  • Require accounting department employees to take vacations.
  • Make use of independent audits.

In conclusion

If you define risk as being the probability of an event attended by the possible consequences, then risk mitigation is the practice of using various tools to manage the risks.

Keep in mind; risk management is not a one-off exercise. Continued monitoring ensures that risks have been correctly identified and assessed and that appropriate controls are in place.

Editor’s note 2:  We are working hard to see to it that our clients weather the storm. Definition of “weather the storm” from Merriam Webster — to deal with a difficult situation without being harmed or damaged too much.

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction subcontractor through our blog posts. Some are new ways of looking at things, and others are refreshers. 

Schulte and Schulte Provides Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

Preventing Loss of Tools, Equipment, and Supplies

Preventing loss through the use of systems and strategies in the construction contracting world.

Preventing Loss of Tools, Equipment, and Supplies

Preventing loss of your stuff

I remember the overall depletion of my dad’s spirit the morning he walked out the door to go to work and discovered his tools had all been stolen. Tools which had taken years to accumulate. Tools which had somehow been magically transformed to fit the curves of his hands, his fingers, his being.

Yes, there was insurance.

No, it didn’t cover the entire loss.

It stinks! It stinks when you have to deal with insurance, downtime, and the feeling of violation. Yet, loss happens.

Preventing loss – where to start

The first steps toward loss prevention are strong locks, proper lighting, and adequate insurance. Beyond these and in reinforcement of them, there are numerous other steps you can take.

Preventing loss – it takes a system

Taking a proper inventory of your tools and equipment is elemental. While you’re at it, take photographs of individual items. And, remember to record the serial numbers.

Creating a checklist of items to be placed in vehicles or a proper storage facility at the close of the workday has at least two benefits. It goes a long way to help your crew understand the importance you place on and the care you take of your items. Plus, it it makes it easier for your crew to better support your goal of no tool or equipment loss.

Preventing loss through marking

Another loss prevention tactic you can use is marking your tools and equipment. Some possibilities include:

  1. Painting “your” color on your items. Two colors will aid in making your tools and equipment more distinctive as most companies apply only one. While many construction companies use red, blue, or orange, few add a stripe of a contrasting color. For example, you can choose turquoise with a wide line of yellow running across it.  
  2. Engraving or etching your items with your logo and other identifying marks is better than paint, (for obvious reasons) and gives you more options. You can add inventory numbers, your address, or a phone number to your items if you choose.
  3. Purchasing GPS Tracking or Bluetooth tool tracking is likely to be a bigger spend than the other options yet perhaps more useful. This story from October of 2018 will give you an idea of how this technology is useful to you as well as to the police. Consider too, some insurance companies offer a discount on the comprehensive portion of their policies when they know you’re using some type of tracking system. 

If you’re considering the benefits of GPS tracking, check out this article which discusses five high tech ways to control construction site theft.

A few other tactics to consider

  • Use a sign-out sheet for company tools
  • Schedule supply deliveries on an as-needed basis
  • Prevent on-site parking
  • Train your team to put their tools up when not in use
  • Offer rewards to those who turn in thieves or provide valuable information on crimes
  • Install alarm systems and/or CCTV on your office, shop, or tool storage areas
  • Train Fido to do his best work at night (yeah, even a nice dog can be a great deterrent to would-be thieves)
  • Put Geo-fencing to use through the aid of apps or other systems
  • Invest in thorough background checks of potential employees
  • Encourage the neighbors of your property or jobsite to report suspicious activity
  • Think about the use of security guards depending on location
  • Establish a system for verifying deliveries   

Preventing loss isn’t always possible

No matter what steps you take or how diligent you are, there are going to be some items which suddenly develop legs and walk away. Yet, there are measures you can take to slow it down and keep it to a minimum.

Having a plan in place if your shop, trailer, vehicle, or jobsite is burgled will make the next steps a little easier. The plan should designate who is in charge of each step which needs to be taken. Developing a checklist of steps will make this process easier. Include appropriate phone numbers or other contact information; local police, your insurance company, GPS tracking company, your landlord (where your business is located,) the GC or owner (of the jobsite) are all possibilities for your list.

By putting loss prevention practices in place, you can do your best to keep the “bad guys” out and the “good guys” honest. Developing a system for your commercial construction firm which addresses the issue of theft is probably not your idea of how to have a good time at the office. But then neither is all the nonsense you have to go through when you lose your tools, equipment, or supplies.

It is our desire this article (among our growing library of construction-centric informational articles) is helpful in assisting commercial construction contractors build better building businesses.

Because we are a virtual “corporate accounting office” for commercial construction businesses we can assist you no matter in which of the 50 United States your business is located. We invite you to get in touch here.