Risk 3 - Managing Risk in an Architectural Firm
Updated feb 2017This is the third of six articles giving an overview as follows:
- The Basics of Risk Management
- Identifying Risk within the firm
- Identifying Risk external to the firm
- Assessing and quantifying Risk
- Allocating, Transferring and Mitigating Risk
- Risk Management Checklist (interactive tool)
Identifying Risk external to the firm
Prior to accepting a commission to work on a project, the architect should be considering the risks likely to arise. It may well be that an initial risk assessment indicates that no attempt should be made to procure the job. Alternatively, it the job is available for acceptance, it would be prudent to consider the risks so that they are known – and allowed for – to the extent necessary to negotiate fees, scope of work, and terms of engagement.Some of the external risk issues may be:
- within the project: client, consultants, contractors, complexity, timeframes, budgets
- external to the project: regulations, politics, community attitudes, the economy
Your firm v the project:
- What is your firm’s experience with this type of project?
- Do you have enough staff and resources to run the project?
- Do you like the delivery method? Is it better to joint-venture?
- Does your firm really want this type of work?
- What will the required services cost?
- Are sufficient contingencies set aside?
- Will the firm profit?
- Can it absorb a loss?
- Will payment provisions support cash flow?
The Client:
- Has the client built anything before?
- Is the client solvent?
- What is the client’s reputation?
- Are the client’s decisions binding?
- What is most important, scope, schedule, budget?
- Is the budget big enough?
- Are the timeframes realistic?
- Do you have good chemistry with the client?
The Terms of Engagement:
- Are they standard (eg NZIA or ACENZ) terms?
- If not, why not. Are the terms satisfactory?
- Are you contracted to the same entity that instructs you?
- Do you gain authority as well as responsibility?
- Exactly what services will you provide?
- Is your scope of services adequate for the job?
- Must your firm perform uninsurable services?
- Are you asked for warranties or guarantees?
- Are you responsible for the work of others?
- Can you select and review their performance?
- How will disputes be resolved?
The Consultants:
- Are they qualified and capable?
- Will they be ready?
- What is their claims history?
- Are they insured?
- Do they share your values about design quality?
- How is their relationship to you defined
The project:
- Is it problematic or conditional upon issues beyond your control?
- What is the likelihood of it actually proceeding?
- What would be the consequences if it did not proceed?
- Is it contrary to political/social/environmental/regulatory norms?
- Are there significant difficult technical issues?
- Is the procurement/construction process likely to be difficult?
- Are those implementing the construction likely to be difficult?
- Are you comfortable with the aims and objectives of the project?
Unknown unknowns:Despite best endeavours, there will be apparently random – or at least not reasonably foreseeable – risks. Some which have surfaced in recent claims include:
- Criminal activity, fraud, or malicious intent (not necessarily illegal)
- Changes in legislation or regulations
- Insolvency of other parties
- Death or incapacity of key stakeholders or producers
- Changes in the economic or environmental circumstances (or beliefs)
