Engineering Inc. - January/February 2016 - (Page 48)
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
f you want to be a high-performing
firm, you need to develop a risk
management culture. Start by
deploying tools the entire firm
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
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
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
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
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
Turning Back the Tides
2016 Legislative Outlook
Racing to Help
2016 Annual Convention Preview
Mergers and Acquisitions
Members in the News
Engineering Inc. - January/February 2016