The Who, What, Where, When, Why and How of Risk Management RLI Design Professionals Design Professionals Learning Event DPLE 116 June 20, 2012 RLI Design Professionals is a Registered Provider with The American Institute of Architects Continuing Education Systems. Credit earned on completion of this program will be reported to CES Records for AIA members. Certificates of Completion for non-AIA members are available on request. This program is registered with the AIA/CES for continuing professional education. As such, it does not include content that may be deemed or construed to be an approval or endorsement by the AIA of any material of construction or any method or manner of handling, using, distributing, or dealing in any material or product. Questions related to specific materials, methods, and services will be addressed at the conclusion of this presentation. Copyright Materials This presentation is protected by US and International Copyright laws. Reproduction, distribution, display and use of the presentation without written permission of the speaker is prohibited. © RLI Design Professionals Course Description This course focuses on business issues both internal and external to a design firm. Often, professional liability claims are the result of business issues, not technical errors. Using the who, what, where, when, why and how maxim, we will develop a better understanding of the business issues that: cause claims prevent claims help provide for a defensible claim otherwise protect your firm in the event a claim is made against you Learning Objectives Participants will: 1)Review the importance of managing risk internally and externally to develop and implement an effective risk management program. 2)Identify some specific aspects of your firm to which we will apply this who, what, where, when, why and how exercise. 3)Enhance the risk management protocols of your firm. 4)Develop your understanding of the business issues that cause claims, prevent claims, help provide for defensible claims, or otherwise protect your firm in the event that a claim is made. Internal and External Process Apply the who, what, where, when, why and how to enhance profitability Practice Issues • Internal • External Business Issues • Internal • External • Internal • External Project Issues Issues Reviewed Internally and Externally On an enterprise level On a business level On a practice level On a project management level On an Enterprise Level Your Firm’s History: - Inception to present - Factors that contributed to the firm’s current status - Outstanding exposures from the past, if applicable - “…to ourselves and our posterity…” The impact that the history of a firm has on its professional liability insurance is significant On an Enterprise Level Mission and Core Values: Internal – provides identity defines culture External—defines who you are to project partners Initial input on the expected level of quality is likely the first time your firm will contemplate professional liability risk management – whether you realize it or not. On an Enterprise Level Business Planning: Set short and long term priorities and goals for your firm. Parties who may contribute: • Risk management advisor • Marketing staff (internal/external) • Insurance broker • Insurance carrier • Attorney • Accountant/Financial Advisor (internal/external) On an Enterprise Level Organizational Structure and Culture: An effective organizational structure facilitates: • Working toward strengths and away from weaknesses • Developing career paths for each employee • Creating a culture of open, effective, and efficient communication • Involving Project Managers in key decisions On an Enterprise Level Technological assets and capabilities: Technological capabilities today Resources to sustain them tomorrow Critical to success of an A/E firm On an Enterprise Level Leadership: Analyze: • Strengths and weaknesses of current leadership • Structures in place to emphasize strengths • Future leaders • Mentoring • Turnover at the management/senior executive level • Retirement and succession planning On an Enterprise Level Financial Analysis: Evaluate capacity to: • Perform services/assume risk • Meet obligations • Obtain/maintain resources to compete • Meet the firm’s goals • Meet goals and expectations of clients On a Business Level Accounting: Your accounting practices will dramatically impact your capacity to manage risk, including: • Invoicing practices and tracking • Frequency and quality of financial reviews • Accounting software • Internal accounting staff On a Business Level Legal/Insurance/Risk Management: Legal: Employment Intellectual property Litigation/Claims Succession/Perpetuation Insurance: Policy renewals Changing needs Risk Management: Education and training On a Business Level Organizational and Human Resource Management: Successful management yields higher profits, which then allows for: • Increased hire/retention rates • Better benefits • Superior training • Competitive career paths • Low turnover On a Practice Level Practice issues Business issues Top line revenue Bottom line profit On a Practice Level Legal Perspective: Project Agreements: • Contract drafting • Contract review • Contract negotiation Disputes/Claims: • Early detection • Internal reporting On a Practice Level Insurance and Risk Management Issues: Risk Management training: • Basics • Purpose/Plan At the insurance level: • Limit of liability • Deductible • Coverage issues On a Practice Level Client/Project/Subconsultant Selection: The process The purpose The criteria On a Practice Level Impacts from a Business Development Perspective: • • • • Lower fees Broader scope of service Tighter schedules Diminishing construction budgets On a Practice Level Business Development and Managing Risk Assumption: Identified Managed Quantified Properly Rewarded On a Project Management Level • • • • • • • • • • • Project staffing Coordination Communication Documentation Expectations Contracts Project accounting and invoicing Subconsultants Quality Change management Scope, schedule, and budget management On a Project Management Level Project Staffing Choose the right team Allocate tasks accordingly Measure workloads Adjust to manage priorities and utilizations On a Project Management Level Coordination Owner A/E Team Others Project CM Contractor On a Project Management Level Communication Documentation  Discussions  Meetings  Decisions  Changes  Substitutions  Submittal review  Other events  Agreements  Minutes  Plans and specifications  Emails  Checklists  Forms  Notes  Storage/retention On a Project Management Level Expectations On a Project Management Level Contracts ilestones easurement anagement On a Project Management Level Project Accounting/Invoicing $ $ $ $ Agree on terms Check on scope Commit on process Bill on time On a Project Management Level Subconsultants Resources Coverage Capabilities Communications Management Contracts Coordination On a Project Management Level Commitment to Quality U.S. GENERAL SERVICES ADMINISTRATION On a Project Management Level Change Management Identify change Project level issues Construction issues Site conditions Level 1 Organizational level issues People issues Poor workmanship Organizational culture Level 2 Level 3 Level 4 On a Project Management Level Scope, Schedule & Budget Management On Every Level WHY Summary Review •Begin at the enterprise level •Continue to drill down: Business level ↓ Practice level ↓ Project level •Look both internally and externally •Ask who, what, where, when, why, and how? •Enhance strategies to: Prevent claims Provide for defensible claims Protect your firm in the event of a claim This concludes The American Institute of Architects Continuing Education Systems Program Laurel Tenuto, Client Risk Management Coordinator [email protected] Barbara Sable, Assistant Vice President [email protected] Jad Vonderheid, Senior Risk Management Consultant [email protected]