Last edited 20 Jul 2021

Residual risk in building development

The development of buildings is carried out in several phases, all involving hazard, uncertainty and risk. Risks which may occur on construction projects can sometimes be designed out or avoided. Remaining risks may be:

According to NRM2: Detailed measurement for building works, the term ‘residual risk’, or ‘retained risk’ refers to risks retained by the employer, that is, unexpected expenditure arising from risks that materialise, which are retained by the employer rather than being transferred to the contractor.

The employer may ask the contractor to provide a price for taking on a risk themselves before deciding to retain a risk.

Residual risks retained and managed by the employer or their project team are described as the employer’s residual risk exposure. Risk allowances should be included in cost plan to provide for this exposure.

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