Minimize Risk - Maximize Performance
July 2015
What is Your Firms Risk Profile?

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Your input is important! Please take 2 minutes and participate in the following radio button survey.
Results will be provided in future newsletters, articles and industry training sessions. 

A/E Industry
& Risk Survey

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Current Survey Responses

Increase 10% - 21%
Increase 20% - 16%
Zero Change - 16%

Claim in the Last 3 Years
Yes - 50%

Cause of Claim(s)
Technical Error, Omission - 23%
Poor Communication - 18%


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How Effective is Your Risk Management Program?








Many design firms attend risk management training sessions and implement certain practices based on an industry trend or claim. Other firms may only concentrate on contracts and insurance coverage’s as a risk management strategy, which is only a portion of an effective risk management program. As they say – “you cannot manage a program that is not measured.” So, the first question that should be asked - How effective is your risk management program? An excellent method in answering that question is determining your firm’s risk profile. Every design firm has a different risk profile based on their unique characteristics - background, staffing, experience, services, applied processes, practices, claim activity, project types, clients, geographic region and other features.


Risk Profile and Higher Performing Firms
Another way of thinking of a risk profile is similar to a physical examination performed by your doctor. The doctor will examine an individual in key areas such as blood work and physical evaluations in determining someone’s overall health. A risk profile does the same thing in assessing key categories of risk for a design firm. When I have evaluated the risk management strategies of "higher performing tirms” the first step applied is an assessment of the firms risk management efforts. With this information, higher performing design firms make continuous improvements based on markets conditions, claim trends, etc., to ensure effective risk management practices are applied for meeting todays challenges for their firm.



Industry Risk and Relevance to Your Firm
One important point for managing risk is assessing the softer side of a design firms practice – business and practice management efforts. These areas drive a majority of claims and litigation against firms - approximately 75%. A one-size fits all risk management approach is not very effective in addressing the specific needs of any design firm.


The majority of industry risk management guidance provided today addresses a trend, generic topic, contracts, or claim in the industry. All very helpful information, however may, or may not be relevant to your firm. For example, client created indemnity provisions in contracts continues to be problematic for many design firms. However, based on the methods your firm has incorporated for the review and approval of contracts - this may not be a concern. Also, design firms may attend a training session on an industry topic or claim trend to obtain a premium credit from their insurance carrier. Again, the topic may, or may not apply to the practices or risk concerns of your firm. Another practice is if a design firm has had a claim, they hopefully will identify lessons learned and methods to help prevent a recurrence of a particular claim. A very helpful process - however usually only applies a limited approach for addressing the root causes, and does not address the many interrelated and upstream reasons for a claim creating the possibility for reoccurrence. One important point - if a firm waits until a claim to make changes to their risk management efforts - it is already too late, and is very costly for the firm.



Design Firm Risk Analysis
To be effective, a firm specific analysis of risk factors is required. Same as a doctor evaluates each patient and prescribes a remedy based on a their individual circumstances, the same approach should be applied in evaluating risk for a design firm creating an individual risk profile. Based on the results, recommendations are made specific for the firm in mitigating future exposures.


A risk analysis is based on extensive data related to the design and construction industry: risks, trends, claims, projects, contracts, applied best practices, etc. Key assessment categories are created based on this data with an analysis conducted of risk management knowledge, and practice management efforts of the firm. A risk analysis can be conducted in several ways:


  • Initial indication obtained through a questionnaire
  • In-depth analysis conducted through a combination of document reviews, practice management inquires and interviews


Based on the firm’s individual responses, the firm would obtain a risk analysis report specific to their firm in specific categories including risk-ratings with recommendations in areas of concern. A plan can then be developed identifying action items, and time-lines for improving risk management efforts - focusing efforts where they are needed.



Design Firms With Claims
Before a design firm has a claim, the more prudent path is to have a risk analysis conducted. Similar to an individual – they should not wait until they have a heart attack to finds ways to improve their overall health. Both situations will be more difficult, time consuming, and costly to recover from. If a firm has had a claim, having an independent risk analysis conducted is a very helpful process for identify root causes, interrelated and associated elements that increase risk and the potential for more claims for the firm. Many hidden risk factors are not identified until a risk analysis is performed. The results of the risk analysis focus on practices that are increasing risk and negatively impacting the firms overall performance. Claims can also have a negative impact on the firm’s reputation and future business opportunities. Firms with claims usually obtain a significant increase in insurance premium, or even worse can be non-renewed based on the insurance carriers underwriting appetite.


Having an independent risk analysis conducted is extremely helpful in identifying areas of concerns as well as interrelated risk factors within the firms operations. This information also provides your insurance agent a helpful tool in demonstrating to the insurance carriers on the methods that are being applied for mitigating risk moving forward. These actions place your firm in a much better position at your insurance renewal.



Benefits and Insurance
When a risk analysis have been conducted, even with firm with claims, design firms receive benefits for their efforts. Insurance carriers that previously declined offering coverage for firms with claims were now offering terms with lower premiums, sometimes between 10 -20% below expiring - creating a significant savings for firms. Certain insurance carriers offer a 50/50 cost sharing credit, or a 10% loss prevention, risk management credit for firms participating in a risk analysis process.


Every design firm has a different risk profile based on their individual characteristics. The first step in identifying risks and creating a risk profile along with the prioritization of risk management efforts to minimize, control and monitoring risk moving forward.



SR Risk Profile

How effective is your risk management program? If you are interested in obtaining more information on the risk analysis process, please contact SmartRisk. SmartRisk has developed an SR Risk Profile® - an easy and effective method for analyzing risk for design firms. Ninety five (95) percent of participating design firm rated the SR Risk Profile ®, excellent and recommend it to other firms. Firms obtain a firm specific SR Risk Profile Report including risk ratings with recommendations for improvement as needed moving forward. An SR Risk Management Action Plan is provided outlining categories where improvement is recommended along with a Certificate of Completion for your records. These documents can be submittal with your PL insurance renewal including the report at the firm’s discretion with advise from your insurance agent.


The SR Risk Profile is endorsed by numerous insurance carriers and has proven to be a great tool for assessing, and improving overall risk management efforts, performance, profitability, increasing insurance options and lowering premiums for design firms.


If you are interested in obtaining more information on the SR Risk Profile, please contact SmartRisk, 626-665-8150, You can also visit our website,


You are welcome to forward this newsletter to others who may be interested.

Thank you.

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SmartRisk is a leading risk and practice management consultancy for design and building professionals. Through firm specific risk assessments, training and consulting, services focus on improving overall performance, profitability and reducing insurance costs through tailored risk management solutions.

If you have any questions about our services, or would like dicusss how we could assist your efforts, please contact us.

Thank you,

Timothy J. Corbett, BSRM, MSM, LEED GA
Founder & President

Copyright and Information Only. This newsletter is for information purposes only and should not be construed nor relied upon as guidance, regulatory or legal advice. Readers should consult with appropriate counsel regarding their specific situations and circumstances. SmartRisk shall not be liable for any errors in content, or for any actions taken in reliance thereon.

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