Risk management strategies for architects

Every business has risks, including architecture firms. Whether you’re about to start an architectural firm or have worked in the industry for years, managing risks is part of the job. Let’s look at common architect risks and hazards that your business might face and ways to minimise them, like architect insurance.

Common architect risks and hazards

As a responsible architect, it’s your job to manage risks so that your business, staff and clients are protected. Here are six architect risks and hazards that commonly impact firms.

1. Client miscommunication

Unhappy clients often lead to costly lawsuits. Often, simple miscommunications are to blame, like the client thinking an add-on service is part of the project package.

2. Scope creep

Projects can change over time, but too much change can create unnecessary risk. Scope creep, when clients add more requirements or deliverables to a project, can cause mistakes, miscommunications, and other events that could lead to a claim or lawsuit.

3. Design and documentation errors

Mistakes happen. However, in architecture, small design flaws and building errors can cause construction delays, wasted materials, or complete rebuilds.

4. Construction mistakes

You may provide accurate, detailed blueprints to the builders, but there’s no guarantee your instructions will be followed to the letter. Construction mistakes caused by others could result in a negligence claim against you, even if you are not at fault.

5. Working with contractors

Hiring contractors is a common practice for many architects. While it is sometimes necessary, it also exposes you to risk. If a contractor you hire makes a mistake, you could be legally responsible for their work.

6. Variable income

Sole proprietor architects are often responsible for all parts of their business, including finding clients. There will be times when things are slow, and your cash flow might suffer until you’re able to line up the next project.

Risk management strategies

Now that you understand some common architect risks and hazards, let’s look at how you can manage the risks in your business.

1. Identify risks in your firm

The first step to managing risks is to identify which ones are present in your business. Architects may face hazards in doing their work and running their business, as well as physical risks such as injuries or property damage.

2. Eliminate or minimise risks

With your architect risks and hazards identified, you can begin to minimise them within your business. In some cases, you may be able to eliminate risks entirely, but for many, taking steps to lessen the chances of them happening might be enough.

Ways that you might manage risks in your architectural firm include:

• Clearly defining services and deliverables in contracts
• Keeping records of client communications and meeting notes
• Creating a system of checks to find and correct mistakes
• Working with trusted and insured contractors
• Removing tripping hazards from walkways
• Devoting time each week towards finding clients and booking future projects

3. Consider business insurance

Accidents can happen, regardless of how well you minimise or eliminate risks within your architectural firm. That’s why many architects have architect insurance.

The different business insurance policies available to architects can create a safety net for your firm, so if the worst happens, your finances will be shielded. You might choose a variety of insurance policies for your business, like:

Professional Indemnity – Covers you for losses claimed by a third party & defence costs due to alleged or actual negligence in your professional services or advice. It may be required to become a licensed architect in some states and territories.

Public Liability – Covers you if a third party claims that your negligent business activities caused them injury or property damage. This includes defence costs cover. It may be required to work with some clients or enter construction sites.

Business Insurance – An insurance package designed to provide cover for your business contents, stock, tools and commercial premises when an insured event occurs (such as fire, storm, theft or even accidental damage). It can also be customised to include cover for unplanned business interruptions, tax audits, and other risks your firm might face.

Management Liability – Covers claims of wrongful acts in the management of the insured business and can include directors and officers liability, employment practices liability, crime, statutory liability and tax audit.

4. Create a risk management plan

If something does go wrong, it may help to have a plan in place to help manage the fallout. A risk management plan makes it clear who does what during a crisis. You may want to include steps to follow for different events and relevant contact numbers (including your insurers’ claims process).

5. Train staff

Risk management is everyone’s responsibility! Even if your team is small, it’s important that they understand why managing risks is important and how they are part of the solution. Regular training and a refresher course each year may be necessary.

6. Continually assess risks

As your firm grows and changes, the architect risks and hazards you face will likely grow and change, too. Risk management will be an ongoing process for you and your staff. It may help to review your business risks regularly (i.e., annually, bi-annually, or every quarter) and look for ways to minimise their impact on your firm.

Protect your architecture firm

Managing the architect risks and hazards in your firm is essential to creating a strong business. By taking steps to minimise these risks, like buying architect insurance, you can help ensure that unexpected events don’t topple your architectural firm.

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