RM Plan for AIA-LA HANDOUT · 2019. 4. 29. · – Internal firm and design team – External design team – Overall project team │ 27 2 Risk Analysis of Client, Project, Team

Presented to: AIA Louisiana

September 11, 2015

© Berkley Design Professional Underwriters. All rights reserved. 1

DEVELOPING A RISK

MANAGEMENT PLAN

FOR YOUR FIRM

© 2015 Berkley Design Professional Underwriters │ 1

Presented September 11, 2015

Presented by

Andrew D. Mendelson, FAIA

SVP – Chief Risk Management Officer at Berkley DP

Licensed architect with 36+ years in practice

PM, Contract Officer, CFO, Director of Practice Management

Member of the AIA Documents Committee and Large Firm Roundtable


September 11, 2015



BerkleyDP’smissionistooffertherightcombinationofproductsandservicesthathelpdesignprofessionalsimproveandprotecttheirbusinesses.•WearePASSIONATEaboutservingdesignfirms•WeareCONNECTEDtoourbrokersandinsureds•WeareCOMMITTEDtosurpassingexpectations

Dedicated to the Design industry

Expert Underwriters

Real‐world Risk Management Education

Expert Claims Service

Legal Notices

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.

Information provided by Berkley Design Professional Underwriters is for general interest and risk management purposes only and should not be construed as legal advice. As laws regarding the use and enforceability of the information contained herein will vary depending upon jurisdiction, the user of the information should consult with an attorney experienced in the laws and regulations of the appropriate jurisdiction for the full legal implications of the information. Practice management recommendations should be carefully reviewed and adapted for the particular project requirements, firm standards and protocols established by the design professional.



September 11, 2015


Course Description

A Risk Management Plan is an essential element of loss prevention and a key ingredient of financial success for a design firm. One that is integrated into a firm’s culture and embraced by its leadership makes a significant positive impact on business performance and longevity. An effective plan contemplates the entire project cycle: from client selection to project inception and through project close‐out

Learning Objectives

Recognize the importance of having a Risk Management Plan

Be able to distinguish between two broad types of risk for design professionals and identify the four parts of the risk management model

Understand the purpose and composition of a Risk Management Team

Learn the seven components of an effective Risk Management Plan

Workshop Outline

Section 1

IMPORTANCE OF A RISK MANAGEMENT PLANSection 2

FUNDAMENTALS OF RISK MANAGEMENTSection 3

THE RISK MANAGEMENT TEAMSection 4

COMPONENTS OF A RISK MANAGEMENT PLAN

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IMPORTANCE OF A RISK MANAGEMENT PLAN

Section 1

│ 7

Claims Are Expensive

Direct Expenses:– Your deductible

– Any expenses beyond your policy or per claim limits

But remember:

A $10,000 claim expense requires $100,000 in new project fees to recoup the loss

(assuming a 10% profit margin…and if your profit margin is lower than that, it will take proportionately more fees to recoup the loss)

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Indirect Expenses:– Lost staff time

Lost Staff Time:

If 80 hours of staff labor are needed to deal with a claim, that translates to $12,000 of billable income on a project (at $150/hr.)

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Indirect Expenses:– Lost staff time

– Lost opportunities

– Diminished client relationships

– Future insurance premiums

Total Cost of Risk

That’s why you need a Risk Management Plan

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September 11, 2015


Establish a Risk Management Policy and Plan for Your Firm

Risk Management +Practice Management +Project Management =

Firm Success

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FUNDAMENTALS OF RISK MANAGEMENT

Section 2

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Two Types of Risk

Legal and insurability risk– Project‐specific provisions

– General terms and conditions

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Two Types of Risk

Legal and insurability risk– Project‐specific provisions

– General terms and conditions

Financial risk– Scope of services

– Project and practice management

│ 14


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Risk Management Model

│ 15

• Client Selection• Project Selection

• Insurance• Contract

• What’s in your control

• Assume financial responsibility

• Monitor• Manage

THE RISK MANAGEMENT TEAM

Section 3

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The Risk Management Team

Role:

Shares knowledge and experience across firm

Embeds RM/PM in firm’s culture

Promotes and advocates best practices

Encourages awareness and action

Develops policy

Conducts post‐projectevaluations

│ 17

The Risk Management Team

Composition:

Market, service, work group representation and leadership

Senior management leadership

Scale to firm size and organization

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September 11, 2015


Typical Firm’s Risk Management Team

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Firm Principal

Project Architect/Manager

Project Architect/Manager

Project Architect/ Manager

Agent/BrokerInsurer

Outside Counsel

StaffStaff Staff

Risk Management TeamRisk Management Team

Board of Directors

CEO

Risk Management TeamLarger Firm Example

Sr. Executive Risk Manager President, CFO, COO

RM Coordinator Commercial

RM Coordinator Education

RM Coordinator Healthcare

General Counsel

│ 20

Project Managers Project Managers Project Managers

Risk Management Team

Agent/BrokerInsurer


September 11, 2015


COMPONENTS OF THE RISK MANAGEMENT PLAN

Section 4

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Seven Components of the Risk Management Plan

Principles of risk management

Risk analysis of client, project, team

Contract review and negotiation

Contract education for the design team

Communication and documentation

Practice management and project delivery

Staff training and development

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1

2

3

4

5

6

7


September 11, 2015


Principles of Risk Management

Adopt a Firm Philosophy:

Business practice approach

Each project has a unique set of risk/reward factors

Construction projects are investments

The client and users of the project are the primary beneficiaries of such investments

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1

Principles of Risk Management

Adopt a Firm Philosophy: (continued)

Design professionals provide services under a Professional Standard of Care for a small percentage of the project cost

The client, therefore, must accept the largest portion of risk on the project

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1


September 11, 2015


Risk Analysis of Client, Project, Team

Establish a Go/No‐Go project evaluation process:

│ 25

2

GO



Client and project selection factors

│ 26

2


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Client and project selection factors Team qualifications

– Internal firm and design team

– External design team

– Overall project team

│ 27

2




Financial analysis

│ 28

2


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Financial aspects Quality and strategic goal alignment

│ 29

2

QUALITY GOAL

GOALGOAL


Tool:

Go/No‐Go Project Evaluation Checklist

Sample available on our website: www.BerkleyDP.com

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2


September 11, 2015


Contract Review and Negotiation

Establish a consistent review process:

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3

Risk ManagerProject PrincipalProject ManagerRM Team Rep

Internal Team

External Resources


Prepare for negotiation of prime agreement:

Establish interim agreement to begin services

Follow established contract review process

Consider deal makers/deal breakers

Perform final analysis of risk/reward profile

Make informed business decisions

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3


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Tool:

BDP Contract Review Guide

Available exclusively to policyholders on BDPrisk.com

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3


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3


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Educate the client:

Alignment of goals and expectations

Scope of Services for fees negotiated

Design professional’s Standard of Care

Contingencies:– Construction

– Design services

Client responsibilities

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3


Subconsultant agreements –adapt firm standard contract forms: Align with Prime Agreement Pass‐through services, responsibilities Proper levels of insurance for discipline/scope

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3


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Contract Education for the Design Team

Ensure a solid understanding of:

Scope of Services

Schedule

Deliverables

Budget

Change management

Key clauses

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4

Contract Education for the Design Team

Clarify responsibilities of:

Design team—prime consultant

Subconsultants

Client

Other parties

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4


September 11, 2015


Communication and Documentation

Develop a Communication Plan:

Recognize that communication issues are a key factor in claims

Align client and design team requirements

Understand client decision‐making process

Address schedule of meetings, presentations and approvals

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5


Develop a Communication Plan: (continued)

Establish responsibility for documentation and its frequency

Recognize value of project record authorship

Include a change management protocol

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5


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Create a Change Management Policy:

Identify issues: project changes, risk situationsIdentify

Notify appropriate individualsNotify

Obtain approval/ authorization for additional services

Authorize

Document change in project fileDocument

5


For key meetings and presentations:

Document:– Options considered

– Recommendations made

– Decisions reached

– Follow‐up required

Use templates

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5


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Tools:

Agenda templates

Available exclusively to policyholders on BDPrisk.com

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5


For key meetings and presentations:

Document:– Options considered

– Recommendations made

– Decisions reached

– Follow‐up required

Use templates

Publish minutes

Distribute with an aging statement

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Aging statement:

“It is assumed that this report reflects an accurate account of discussions held and decisions reached unless written notification to the contrary is received within (specific time)”

5


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Project performance goals:

Sustainability

Building performance plan

Owner’s Project Requirements (Cx)

Innovative design, materials, systems

Informed consent of client

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Communication and Documentation5


Document management:

Use a consistent file format

Develop and follow a record retention policy

Archive and store

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5


September 11, 2015



Document management:

Use a consistent file format

Develop and follow a record retention policy

Archive and store

Email protocol:

Caution!

Email lives forever

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5


Tracked documents:

O‐A‐C Meeting Minutes

Submittals

RFIs

Change Orders

Payment requests

Agency approvals

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5


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Issues:

Early identification

Response

Solutions

Engage senior‐level expertise

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5

Practice Management and Project Delivery

Project planning to align:

Scope

Schedule

Deliverables

Staffing

Financial goals

│ 50

Financial Goals

Schedule

Scope

6


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Establish a Project Delivery Process:

Framework for project planning, execution, quality management

Key / critical activities

– Design and production

– Deliverables and milestones

– Presentations and reviews

– Regulatory submissions

– Agency approvals

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6


Quality Management in Project Delivery:

Project Delivery Process establishes your firm’s baseline of services

Tools and templates– Standards– Guidelines– Procedures– Protocols– Checklists

Continuous effort

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6


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Tools:

BDP Project Delivery Process: 50 Key Activities

Template for Quality Management Phase Checklist

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6


BIM and digital practice:

Utilize digital exchange agreements

Define expected and allowable use of models

Establish right to rely

Create BIM execution plan

6


September 11, 2015



IT and design technology:

Systems and support

Enable staff performance

Sufficient level of investment – BIM

Software management

Cyber security and data backup/recovery

│ 55

Nicolas Tye Architects

6


Measuring Performance:

Responsibility and accountability– Internal design team

– Subconsultants

– Contractors

– Other parties in project delivery

Financial performance

Post‐project evaluation│ 56

6


September 11, 2015


Staff Training and Development

T&D Plan elements:

Mentor and invest for long‐term retention

Develop and appreciate resources– Design– Technical– Project management

Recognize and capitalize on generational differences

│ 57

7

Staff Training and Development

T&D Plan elements: (continued)

Provide training in:– Leadership– Communication– Team management skills

Offer opportunities for growth

Instill quality and risk management as key elements of your firm’s culture

│ 58

7


September 11, 2015


In today’s workshop you’ve learned:

Why a Risk Management Plan is important

Elements of the risk management model for design professionals

The role and composition of a Risk Management Team

The seven components of developing a Risk Management Plan

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Questions?