Effective Risk Management

risk management

Of all the errors AEC professionals can make, avoiding risk at all costs is probably the most damaging to a business. Not all 4-letter words are bad! Exactly because so many competitors try to shield their firms from ALL risk creates an extraordinary competitive opportunity for those few firms that learn how to use risk to their advantage.

PSMJ’s deep experience and research in AEC business risk helps its clients to turn what appears to be a liability into a competitive advantage – and, paradoxically – actually lowering real risk by “buying into” manageable risk.

What to do:

First: Stop thinking about risk from your perspective, and start thinking about it from your client’s perspective. Clients – private and public – want certainty over project outcomes, particularly with regard to project cost and time. If designers can’t offer that certainty, clients will go to, and pay, people who do.

Second: Review the Questions and Answers to the right.

For more information generally: go to Risk Management 101.

If you have a project with potentially serious risk issues, PSMJ has the experience to help. Bill Parker has wide experience in managing construction risk in major projects across the planet. Charles Nelson researched and wrote Risk Management for Architects and the Australian Institute of Architects distance learning program on Risk Management.

Charles has consulted on risk issues to the NSW Dep’t. of Public Works, the Victorian Office of Building (now Office of Projects Victoria) and to one of the world’s largest AEC PI insurers, DPIC Companies in California (now XL Design Professional Group).

Contact Bill Parker or Charles Nelson

You Asked...

Click a question to see the answer
  1. What’s the most efficient way to assess project risk?


    Question 1 answer:

    Every project has risks, but every practice will be affected by the same risks in slightly different ways. Some firms can manage risks that other firms can’t.

    The DesignRisk app (https://buildingtech.com/designrisk/) is the easiest, fastest way to conduct a risk assessment and make the go – no-go decision. Check it out today.

    Smart design managers understand that being creative about managing risk can give the practice a hard-to-beat marketing edge. If you aren’t sure what that means, attend either the PM Essentials – Design program or the PM Essentials – Construction program.

    You will learn how to use risk to your strategic advantage.

  2. In your experience, what are the things clients want most?


    Question 2 answer:

    The great majority of clients, in our experience, want 5 things in commissioning a project:

    1. Functional outcomes; results “fit for purpose”
    2. Quality, particularly in terms of low maintenance, minimal “aging”, and retention of value
    3. Timeliness of delivery, at all milestones
    4. Lowest capital cost to achieve the above three
    5. No risk; certainty of performance of the above four

    These outcomes are not the stuff of winning design awards. Occasionally, some clients want “signature” or “landmark” projects. They will even pay a bit more to get them. For that, they mostly go to “starchitects”.

    The first three of these points are completely within your control. So is the 4th, provided that you get sound cost advice on your design as you progress the solution, and provided you allow a buffer on cost. Never design to 100% of the client’s budget – on “greenfield” sites, design for 95% of the client’s budget. On adaptive reuse and any site likely to harbour latent conditions, design for 85% of the budget. There are other powerful strategies you can use as well; we’ll show you how to deploy them.

    If you can deliver on the first 4 of those, you can have a reasonable negotiation with the client on how to best manage those risks that are always present. PSMJ’s programs show you how.

    It’s the 5th point above where you need first-class negotiating skills to succeed. Your best place to get them? Sign up for PSMJ’s new Assertive Design Practice (ADP) program, commencing late 2021.

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