Engineering Inc. - January/February 2016 - (Page 48)

Guest Column BY G L E N R . M A N G O L D A N D C H A R L E S W. KO P P L I N Making a List and Checking It Twice: Managing Risk Through Awareness I f you want to be a high-performing firm, you need to develop a risk management culture. Start by deploying tools the entire firm can use. A firm's risks come from services performed, projects worked on, clients and third parties. By making everyone aware of the various types of risks and where they come from, design firms can mitigate their exposure and improve their bottom line. Any repetitive task that a design professional performs is a candidate for a checklist. Some of these tasks include the evaluation of prospective clients, the go/no-go decision for pursuing a project and a list of the services that will be performed for an engagement. Checklists help ensure that consistent criteria are used throughout the entire firm. Checklists also help identify potential risks. A detailed Glen R. Mangold checklist of services is an excellent tool to show services required and performed by the firm as well as services required but declined by the client. This detailed list helps prevent disputes over the services that are provided. Limited Services Be aware, however, of a client that wants to limit the firm's services. The extent of required services performed by the firm is inversely Charles W. Kopplin proportional to the amount of risk a firm takes on for the project. A review of past professional liability claims shows a correlation between a low amount of required services provided and an increase in the number of claims. Another valuable checklist covers contract reviews. This list will help identify missing or onerous clauses. It is especially helpful to identify clauses that may be uninsurable under your 48 ENGINEERING INC. JANUARY / FEBRUARY 2016 professional liability policy, so the firm has the opportunity to mitigate its risks by negotiating appropriate contract changes. A client that is unwilling to make changes may have unrealistic expectations. If so, the best risk management response may be to walk away from the project. When developing checklists, there is no need to re-create the wheel. Numerous business and technical societies, including ACEC, have developed checklist samples. The professional liability insurance industry also offers checklists. Using these samples, a firm can tailor checklists appropriate for their firm and type of practice. At the beginning of a project, it is important to discuss the potential risks with the client, including using client-supplied information and data. The contract should state that the firm can rely on the accuracy of the information. If the client is not willing to let the firm rely on the information, then data verification needs to be included in the scope of services and the fee. A well-vetted strategic plan can help a firm manage its risks because it provides guidance on not pursuing clients, services or projects where the firm has limited or no experience and expertise. If the firm is venturing into a new area, the strategic plan should contain guidance on how to manage those risks. When taking on riskier engagements, the firm should charge an appropriate risk premium. Role of PLI A firm can transfer some of its risk by purchasing insurance. This will not protect the firm from the risk, but it will, after paying deductibles, cover the costs up to the policy limits. However, it will not cover the cost of lost staff time spent defending a claim. By developing a firm-wide risk awareness and management culture, firms can greatly mitigate their risks. Every employee needs to be a risk manager. Utilizing tools like checklists makes it easier to engage all employees as well as provide consistency across the firm. Firms that engage their entire staff in risk management are among the top performers in the A/E industry. Glen R. Mangold, CPCU, is managing director of the architects/ engineers program for Markel Corporation, a leading provider of professional liability insurance. He has more than 25 years' experience in the insurance industry. He can be reached at Charles W. Kopplin, P.E., FACEC, has more than 40 years' experience as a consulting engineer, including 14 years as the risk manager for an ENR Top 500 Design Firm. He can be reached at

Table of Contents for the Digital Edition of Engineering Inc. - January/February 2016

Engineering Inc. - January/february 2016
Table of Contents
From ACEC to You
Market Watch
Legislative Action
Turning Back the Tides
2016 Legislative Outlook
Racing to Help
Going Global
Smooth Sailing
2016 Annual Convention Preview
Business Insights
Mergers and Acquisitions
Members in the News
Guest Column

Engineering Inc. - January/February 2016