Risk Management
(8 Minute Read)

What risks do plumbing contractors actually need to worry about?

There is no way around it: your business is going to have some amount of risk. In a dynamic world, avoiding all risk is just not a realistic strategy. Instead of avoidance, a healthy risk management strategy focuses on identifying the risks to your business and prioritizing them. Like many contracting industries plumbers face a variety of risks today that range from safety to operational issues and may seem too numerous to count. By breaking these risks down into primary categories, a plumbing business can start to determine which risks they have a plan for and perhaps identify some risks they are not prepared for. These key risks can then be a foundation for a risk mitigation strategy that will set a company up for long term success. Let’s look at the main categories of risk the average plumbing contractor will face.  

The Plumbing Industry

The plumbing industry is large and competitive. As of 2019 there were over 120,000 plumbing companies and around 500,000 jobs in the industry. There are several trends to be aware of in the industry. Like many skill-based trades, there is increased demand for talent, but many businesses are struggling to find qualified employees. Plumbing is also an industry with significant innovation. From tankless water heaters to smart pipe systems, innovation is on the rise to combat issues like drought and other environmental concerns. The COVID pandemic has driven change as well, with more customers demanding contactless service. Plumbers also face substantial safety risk working with both hazardous materials and in dangerous conditions. The list goes on, and it becomes clear that thorough risk analysis is a vital step for plumbing businesses. However, by breaking down their risk across several primary exposure areas plumbers can begin to get an idea of where they stand, and what may need to improve. Let’s start with 5:

  • Fleet  
  • Equipment  
  • Safety
  • Operational  
  • Talent Retention

Fleet Exposure

The nature of plumbing work often necessitates the use of vehicles. Most jobs will require the company to transport both equipment and personnel from the home base to a job site. Just like plumbing companies, fleets come in a variety of shapes and sizes. While larger companies will likely have their own fleet of custom vans or trucks, smaller companies often allow their employees to use their personal vehicles. Regardless, the fleet is often an overlooked source of both liability and business risk. Property and personal damage could result from distracted or drowsy driving, poor maintenance of vehicles, or driver error. From an operations perspective, fleet costs can quickly get out of hand due to driver behavior like running the engine at stops, putting wear and tear on vehicles, and maintenance programs can compound the issue if they are inefficient [1]. We really can’t stress enough that a fleet is a risk category that can’t be ignored. There are several strategies to combat fleet risk, from the development of maintenance and safety programs to fleet telematics solutions. If you want to dig deeper into fleet strategy, check out this article.

Equipment Exposure

Equipment risk is major exposure in most skilled trades. The fact of the matter is that in order to complete work in an effective and efficient manner, plumbers need specialized tools, components and equipment. Just a few examples would be press fitting systems, welding tools and bore scopes. While the cost of replacing broken tools or repairing damage to equipment may seem obvious, there are several risks that often slip under the radar.

Theft

Unfortunately, the plumbing industry is a disproportionate risk for theft of equipment and tools. In fact, a 2020 report indicated that 55% of plumbers experienced theft of their tools or heavy equipment [2]. A little further analysis revealed that despite this risk, many plumbers have bad habits when it comes to keeping their tools safe. 73% indicated that they leave tools and equipment in vans overnight, which is when most thefts occurred. Plumbing businesses should have policies in place to track inventory checked in and out for jobs, and should ensure that expensive equipment or materials are stored in secure locations when they are not in use.  

Productivity Loss

Some specialized equipment, on top of being expensive, may have a long lead time for replacement or maintenance. A company that does some work on plumbing lines that require welding may have only a couple of welding rigs. If they go down, and you must wait on repairs or replacements to arrive, you could experience delays in work that could cost you financially in the short term and affect your business in the long term due to customer dissatisfaction.

Supply Chain/Inventory Management

The way a plumber manages their inventory and supply chain are crucial. Consider the following questions. Do you prescreen potential suppliers for reputation and loss history? Do you regularly examine shipments and current inventory for subpar or faulty pieces? Do you keep a detailed record of inventory and supplier in the event that a defective piece would fail? Do you ever modify parts that could void the supplier warranty and introduce liability? These questions, and many more are vital to ask yourself in order to ensure that your approach to your supply chain and inventory is intentional and does its utmost to mitigate your exposure.  

Safety

Plumbing work creates ample risk for injury. While this can be said of many skilled trades there are several risks that are prevalent in the plumbing industry. The first of these is hearing loss. In fact, 48% of plumbers report perceived hearing loss due to loud noises on jobsites. [3] There is also a high risk of eye injury from things like bursting pipes and debris. Plumbers are also at a high risk of musculoskeletal disorders according to the National Institute for Occupational Health and Safety due to the repetitive use of hand tools that often have substandard vibration reduction. Another risk to consider is consistent exposure to hazardous materials. The most common of these for plumbers are asbestos and human/rodent waste. At a bare minimum, a plumbing company should have policies in place to assess these risks on job sites and have strict policies on the use of proper personal protection equipment (PPE).

The last major set of risks that we will outline here come into play for plumbing companies that work in situations that require frequent welding. Once again, the proper PPE is vital for injury prevention and special care should be taken to isolate the areas where welding occurs to prevent injury to other workers, clients, or passers-by. Remember that even if you have workers comp insurance in place, don’t write your safety risk off as “handled”. There is more to safety than coverage in case of an accident. Instead of a reactive solution it is vital to consider risks proactively and then create a culture throughout your business that reduces both the frequency and severity of safety incidents long term. Changing your safety culture won’t happen overnight, but it is an important step to lowering the overall risk your company faces. For more information on safety culture change check out our blog post on Safety and how it can position a company for long term success, and maybe even save you some money on your insurance.  

Operational Risk

Plumbing operations face some unique operational challenges, especially when considering recent trends within the industry. Recently, due in large part to the COVID-19 pandemic, clients are demanding contactless service. Of course, plumbing is not something that can be fixed remotely, but many businesses are moving scheduling and consulting to video chat formats and creating tools to allow customers to upload images of issues. The goal is to do as much of the pre-repair operations without contact. Companies that don’t offer these services could see a decline in their competitive position against those organizations with these capabilities.

Another trend that plumbers should be thinking about is the rise of cyber threats in the industry. Smaller businesses are being targeted at double the rate they were in 8 years ago with the most frequent form of attack being phishing emails as well as point of sale system hacks [4] Training employees to identify suspicious emails, as well as ensuring that systems are compliant with industry data security requirements are the starting point for a cyber risk mitigation strategy, but they shouldn’t be the end point as the cyber threat continues to evolve. The final risk that can’t be left unsaid in the operational category is the quality of completed work. Many plumbers face substantial liability due to faulty work that results in siphoning, contamination, property, or personal damages. For many plumbers it is wise to have a relationship with or employ a certified plumbing inspector to ensure the quality of completed work is up to standard.

Talent Retention

As with many contracting industries, there is a high demand for talented workers within the plumbing industry. When you combine the required training with the experience gained over years of working jobs, you end up with workers who are not necessarily easy to replace. This issue comes to a head with smaller plumbing contractors as the loss of a key employee could mean the inability to complete contracts and the loss of revenue and long-term reputation. This issue is not limited to workers with technical skills. An often-overlooked source of risk is with employees who have accumulated knowledge that is vital to the operations of a company: like the person who creates all the contracts or handles the inventory system. If organizational learning isn’t preserved, the loss of one key employee could cripple operations and do substantial damage. When you do hire new employees, what policies do you have in place to ensure that less experienced workers are placed with supervisors and trained appropriately. Do you have requirements in place for continued education and staying up to date on industry trends such as smart systems?  

There are many factors to consider when looking at how to mitigate the risks of lost talent. From attracting talent to keeping competitors from poaching your people, the key is to ensure that you have a strategy in place to retain talent and preserve organizational knowledge. One place we like to start is with a discussion on organizational health — it could be your secret weapon for attracting and retaining top talent.  

A Partner in Driving Long-Term Success

The five categories of risk exposure we have outlined here are a starting point, but it is important to remember that every company is unique. Your organization, and its risk portfolio will require honest assessment of the risk you face and some strategic thinking about how to mitigate risk and get the right coverage.  

Here at Ledgestone, we gather data from across the organizations we work with in order to get a holistic picture of the risk they face in each exposure category. We then work with them to implement a data-driven strategy that will set them up for long-term risk mitigation and success.

We would love to learn more about you, your organization, and how we can use our data-driven approach to help you assess and mitigate the risk you face. Risk today is dynamic, and we want to be a dynamic partner. Follow this link to reach out to one of our specialists, we would love to talk to you!

References
  1. Spireon. (2020). 5 Areas Where Your Plumbing Fleet is Leaking Money. FleetLocate. https://www.spireon.com/wp-content/uploads/FL_5-Areas-In-Plumbing_WhitePaper_102018.pdf.  
  1. Over half of plumbers victims of tool theft. PHAM News Plumbing Heating and Air Movement News Magazine RSS. (2020). https://www.phamnews.co.uk/over-half-of-plumbers-victims-of-tool-theft/.  
  1. Conick, H. (n.d.). Top 10 Safety Hazards of Working as a Plumber. Contractor Magazine. https://www.contractormag.com/plumbing/media-gallery/20882098/top-10-safety-hazards-of-working-as-a-plumber?slide=2.  
  1. Kneiszel, J. (2018, February 22). Will cyber insurance save you from devastating losses? Plumber Magazine. https://www.plumbermag.com/how-to-articles/insurance_marketing_business_sales/will_cyber_insurance_save_you_from_devastating_losses.