10 Foundations for Risk Management

Risk ManagementThe Foundations for Risk Management presented herein will be the basis for the tools and other content that the Risk Management Program committee will deliver at the upcoming convocation. These Foundations were developed by engineers in private practice to help engineering firms focus their practice on avoiding and minimizing risk. The first five Foundations deal with the process of the engineering business and the last five deal with project management.

1. Culture

Create a culture of managing risk and preventing claims

Creating a culture of risk management and claims prevention entails instilling in your company an overriding vision that stresses quality control and managing risk as a vital part of your business practice. This vision must become a core value of the firm and come from the top down. Stress the importance of risk management as often as possible among the staff, as well as the consequences of ignoring it. Creating this culture requires both strategic and operational planning. It should involve all levels of the staff and even involve clients. Quality must take precedence over profits. When quality is established, profits tend to follow.

2. Prevention and Proactivity

Act with preventive techniques, not just react

Develop processes and systems within the firm with risk prevention in mind. Often, early planning canidentify potential sources of risk, and early intervention can mitigate the severity of claims. When risk is identified, a proactive plan can be developed to change the conditions that lead to that risk or avoid the risk altogether. Clearly, some events happen without warning and we must react. Although we cannot plan for the specifics of each case, identifying where risks may arise and establishing priorities before hand provide the proper framework with which to deal with unforeseen events. Having a plan allows quick action to minimize the damage these events may cause. An example of this would be having a plan in place to deal with an owner who wants to drive down your fee by asking to eliminate construction phase services. Do you have a plan that will allow you to promptly respond to such a request in a way that minimizes your

3. Planning

Plan to be claims free

Closely related to the Foundation of Prevention and Proactivity is the attribute of planning. Claims-free results do not happen by chance; they require proper planning. Strategic planning means taking into consideration how items such as staff hiring and retention, client selection, project type selection, training programs and quality assurance programs can all contribute to reducing claims. Project planning is also an important aspect of risk management. A project work plan can help focus on areas that reduce risk such as information flow, communication pathways, contract negotiations, and scope definition. For a plan to be effective, it should be simple, workable, and readily communicable. Communicating the plan to all involved parties, reinforcing the need to adhere to it, and monitoring activities to see if it is being followed are all important steps to having an effective, claims-free practice.

4. Communication

Communicate to match expectations with perceptions

It is well documented that communication issues represent a large percentage of the basis for claims against engineers. When all parties in a project communicate their expectations and perceptions early and often, the “disconnects” between opposing parties can be readily established. Steps can then be taken to resolve those differences and align everyone’s expectations and perceptions. To be effective, communication must flow both up and down the chain of command so that all parties are informed. Good planning will lead to good communication. All parties should agree on acceptable means and lines of communication early in the process. Develop tools to aid the communication process such as correspondence logs, telephone conversation logs, and e-mail protocol. Communication must be handled in a professional and courteous manner. When dealing with a contentious issue, it is not a good practice to send a letter or e-mail immediately after composing it. Take time and then re-read the communication before sending it. Communicating only the facts of the case and avoiding emotional outbursts or statements of opinion can help to avoid problems or making problems worse.

5. Education

Educate all of the players

Proper training is the basis for expecting proper results in any field. Engineers that have a greater amount of experience have a duty to pass their wisdom on to both staff and clients. As professionals, engineerspossess a unique body of knowledge that our clients rely on to accomplish their goals. Creating a formal mentoring process helps less-experienced staff members become more effective in their careers. The skills that experienced engineering professionals gain during their careers relating to business practices such as negotiating, communicating, and planning are all factors that can aid in managing risk. Those skills must be passed down to less-experienced employees so that everyone can effectively participate in risk management. Owners who are unfamiliar with the design and construction process also need to be educated so that expectations about the nature of professional services and the proper allocation of risk can be cast.