Composing a smarter approach to risk allocation in Collaborative-Based projects

As infrastructure projects become more complex, traditional risk models are falling short. A smarter, collaborative approach is gaining ground, one that aligns stakeholders early, distributes risk strategically and builds trust through transparency and data. This shift is essential for delivering projects efficiently and confidently. Learn how Hatch is helping lead this transformation.

Given the growing complexity of projects and the high level of uncertainty in the global market, both public and private owners have been actively exploring new ways of delivering projects that offer greater financial value and enable faster, safer completion. In response to this need, many countries, including Canada, have seen a market shift toward collaborative-based delivery approaches that emphasize proactive risk resolution and ensure that risks are allocated fairly and effectively to the parties best equipped to manage them.

Using these approaches, stakeholders work collaboratively to establish a risk-adjusted price for the delivery phase, which is only finalized once all risks have been thoroughly assessed and distributed in a strategic and equitable manner. However, despite growing interest in the rapid adoption of these delivery models, empirical evidence shows that many stakeholders remain concerned about the complexity of the risk allocation process and the lack of comprehensive, data-driven tools to support informed decision making.

This can lead to a fragmented process and undermine the confidence and effectiveness of relationships between owners, designers, contractors, and subcontractors. This is particularly concerning when parties attempt to shift risk onto others without fully considering each party's technical and behavioral risk-solving capabilities. When one party is burdened with responsibilities they are not prepared to manage, the impact extends well beyond the initial setback, causing delays, financial losses, and a decline in trust.

 

 

A new approach

Risk allocation on large-scale construction projects can sometimes resemble a musical score without a conductor. The result? Cost overruns, delays, disputes, and potential litigation. These outcomes don’t stem from a lack of effort, but from a lack of coordination and a shared objective and vision.

Imagine a symphony orchestra where success depends on harmony, not individual talent. A more effective risk allocation approach would mirror such a model, emphasizing collaboration and shared understanding. Such a methodology would emphasize that risks should be collectively addressed and assigned using data-driven insights to minimize human bias and support objective assessment.

It would consider not only technical capabilities but also behavioral factors such as trust and open and transparent communication; elements often overlooked in traditional models. The value proposition of this smart risk distribution method lies in its ability to deliver significant cost savings by minimizing unnecessary mitigation expenses, especially those incurred by parties who are not well-positioned to manage certain risks.

Shaping the future of risk allocation

According to a 2008 study by the Construction Industry Institute, nearly 15% of construction cost overruns stem from improper risk allocation. Optimizing how risks are distributed among project stakeholders could help prevent substantial losses—potentially saving billions on large-scale developments.

With stakes this high, risk management is not a solo endeavor.

Successful, forward-thinking project teams collaborate with partners who have deep expertise navigating complex risks. Hatch’s integrated framework reflects this philosophy. It combines tailored risk solutions and industry-leading assessment methodologies that apply across all sectors, ensuring every stakeholder is aligned and every risk is proactively addressed.

This kind of orchestration goes beyond technical precision. It requires behavioral insights, historical context, and a shared understanding of how risk should be distributed and managed. Grounded in data and experience, Hatch’s approach helps teams align early and manage risks collectively, ensuring the right people are addressing the right challenges at the right time.

If you're working on a large capital project involving complex collaboration, it's never too early to begin the risk management dialogue. Let’s start a conversation. Contact us to learn how our integrated risk management framework can support informed decision-making.