Construction has started picking up more rapidly in recentmonths. According to Forbes, construction starts in January were up 10% nationallyfrom January 2011, and some major metros in particular like NYC,Dallas, Houston, Phoenix are seeing an uptick in new construction.

In the past, construction lenders have looked to independent,third-party consultants to help manage construction lendingrisk. Having gone through the recession and constructionhalt, many lenders are understaffed and the need to rely on3^rd party firms may be greater than ever. With industry specialized expertise most lenders don’t have,3^rd party consulting firms have become a crucial assetto any commercial lender. Construction Risk Management is no exception.

So what exactly do Construction Risk Management firms do?

Construction Risk Management firms offer a wealth of tools tohelp keep construction projects on track and can even save lendersloan dollars, from project start to finish – i.e. from the initial review of aproject, to monitoring for progress during the project, toadministering funds all the way through a project, to estimatingthe cost to complete a project that hashalted.

One important distinction of Construction Risk Management isthat it is proactive versus reactive. As anexample, a performance bond is reactive and only kicks inonce a default has happened. To the contrary, tools such asFunds Control combined with Construction Progress Monitoring, where eachdraw request is reviewed and disbursed by a 3^rd partyconsulting firm only if the project is meeting the progressschedule, is proactive and can identify problems early onwhich allows for corrective action. Another way toproactively manage risk is thorough Contractor Evaluations.