Five Tactics for Using Risk as Your Friend, not Your Enemy
Charles Nelson AIA, LFRAIA – 02.2014
Most design professionals treat risk as a 4-letter word, to be avoided whenever possible. Yet, most projects have more risks lurking in the corners than a flophouse has cockroaches – studiously ignored by your competitors. What a great opportunity!
Meanwhile, your clients’ lawyers are working overtime to dream up language to tie you hand and foot while the risk cockroaches crawl around undeterred, eyeing you hungrily. Time to start a Raiding party:
- Tackle the risk issues head on: not just the ones that the beaks have identified, but also the others that your experience tells you are likely to affect the project. Elevate the importance of risks that the lawyers didn’t anticipate, and show that you know how to deal with them. That lowers the relative importance of the generic murder clauses; your list is more powerful, more specific.
- Sort the proposed contractual risks into two piles: Those that would (or might) void your PI insurance, and those that you could carry, but only at a price. Examples of the first group are your failure to control events outside your control, and taking responsibility for actions by the client, usually through indemnification and defending the client. Examples of the second are consequential damages of your failure to perform.
- Dismiss the first pile as ideas harmful for the client; you wouldn’t want to deprive the client of the protection of your insurance.
- Treat the rest of the proposed contractual risks as separate add alternatives that your client can add to the scope of work, at a cost commensurate with the risk. The exact wording is important, and has to meet with your lawyer’s and your insurance carrier’s approval. If UV50 sunscreen costs 5 times more than UV10 sunscreen, the client might opt for the latter.
- Prepare, as part of your proposal, a project risk management plan. Note that this is about risk specific to the project, not to your role as consultant, as are mainly the contractual risks. This plan, in the first instance, should tell you what the risks are, and how to mitigate them. It refocuses risk perspective from your consulting role to the project, and shows the client what to expect – and how you propose to manage the risks, in a fair and equitable way.
Put several of these tactics together to build a strategy for approaching risk.