Risk management and insurances

All human activity engenders some risk. The reputable architect accepts that he or she has a duty of care. At the same time other parties to projects also have a responsibility and understandably there is a reluctance to shoulder the responsibility of others. However, the architect who is reluctant to draw the client's attention to the commercial risks attendant upon many decisions must accept some blame (eg adoption of innovative design, economic constraints, reliance on feasibility studies often based on assumptions). Not only is it good risk-management practice to advise clients of the risks, it is proper in law. The High Court has confirmed the duty of care of professionals to give advice to inform their clients as the failure to warn, even in the absence of a request for information, may be negligent.

Some risk in projects should properly attach to the contractor, the owner, consulting engineer etc. and where patent products are specified, to the supplier/manufacturer. The transfer of risks to these parties in the legal sense constitutes an important part of risk management.

In brief, risk management can be divided into the following categories:

• Risk identification
• Risk analysis
• Risk treatment
• Risk transfer

Risk management services

Planned Cover's (formerly Professional Risk Services) experience suggests that the following areas should be considered in any risk management strategy adopted by architects:

• Communication – failures occur in architects' relationships with clients, other consultants, contractors and government authorities.
• Consider whether the architect and the client understand the brief.
• Supervise inexperienced staff and periodically review office procedures, site meeting procedures, sign-offs and take reasonable steps so that less experienced staff have backup when difficulties are encountered; not only may the principal be liable, but also the staff.
• Confirm variations in writing.
• Take reasonable steps so that there are not any 'surprises' for the client.
• Take reasonable steps so that projects are well planned and managed, including scheduling, costing and budgeting.
• Develop management skills.
• Have clear contracts of engagement with clients in place.
• Clearly define the basis of remuneration underlying the architect's engagement.
• Greed – examine whether too much work has been taken on.
• If a brief is amended in the course of engagement, all changes should be clearly recorded and documented.
• Confirm changes to the budget as a result of changes to the brief are discussed with the client and confirmed in writing.
• Emphasise to the client the commercial risks.
• Where the client requests, for reasons of economy, that building works depart from good building practice, the architect should refuse to accept the commission (the architect may well be absolved contractually from liability to the client, but there is a potential liability to other parties, ie future owners or third parties who are entitled to rely on the architect's judgement).
• Include in partners' or directors' meetings an item such as 'notifications' or 'errors and omissions' so that all become aware of a problem in an atmosphere of mutual learning, with a view to avoiding repeat situations.
• Take contemporaneous file notes of all interactions (face-to-face meetings, telephone conversations, site meetings, etc) related to any project.