Top Five Risk Management Tips


Risk management, simply put, is the identification of threats to your well-being and the decision of how to respond. Risk management takes on an additional level of importance for professionals like architects since they are personally liable for the professional services they provide. Below are five areas vital to design professionals who want to reduce or transfer risk:

1) Client Selection:

Monitor your interaction with clients and potential clients and be aware of danger signs. Walking away from a project could be the best answer if the relationship starts off with confrontations, excuses and unreturned phone calls. Similarly, beware of the red flags that signal a dissatisfied—and possibly litigious—client: late payments, disputes with the contractor, breakdown in communication.

2) Contracts:

Be certain to use some sort of scope – of – services description on each project—this gives your attorney something to work with in case of a problem on the job. Consider reviewing your boilerplate agreement with a risk management consultant and attorney, since getting the letter of agreement right the first time pays dividends for years. Be wary when confronted with client-imposed contracts, especially if they contain provisions like “the Engineer agrees to defend and hold harmless the owners….” Some of these seem innocuous but have been crafted to transfer responsibility to you, and may not be covered under your Professional Liability coverage.

3) Professional Liability Insurance:

You have the opportunity to shift risk away from your firm by purchasing a professional liability insurance policy. Make sure you work with a specialist broker familiar with the design field who can tailor your policy for your particular needs. Further, a good broker can review your standard client contract to determine if you’re agreeing to something not covered by that insurance.

4) Certificates of Insurance:

Make certain that you use only insured consultants, and that they issue you a Certificate of Insurance each year naming you as the Certificate Holder. This will show you the limits of liability they maintain, the dates of the coverage, and if they cancel the policy (or it is canceled), the insurer will endeavor to notify you 30 days in advance.

5) Assumption of Responsibility:

Be clear on your responsibility for the project. If your contract does not contain responsibility for site safety, don’t begin instructing workers on how to avoid potential hazards. If you do, you may be taking on responsibilities that you don’t want, aren’t being paid for and, frankly, cannot handle effectively. Also, be sure your marketing material doesn’t contain exaggerations, as a boastful proposal could be interpreted as part of a contract, and you could be held to a higher standard of care.