Ignoring these areas of risk and their potential implications can have significant impacts on your success and your firm’s future.
You probably became an engineer or architect because you’re passionate about designing work that serves communities. And you probably entered your chosen profession with an understanding that you would bear the heavy responsibility of designing infrastructure that people rely on every day. That’s daunting. But guess what? As you advance in your career, you assume a whole new layer of risk as a leader in your firm. Fun, right? Congratulations to you!
But that’s the reality. Engineering and architectural firms are faced with risk-versus-reward-related decisions at virtually every turn. Sometimes the decision is squarely within the wheelhouse of the engineering and architectural professionals: Can a project be designed such that risk of damage to the structure, related structures, people, etc. can be avoided? Or is the assumed risk on a particular project properly aligned with the potential to earn a profit?
While those straightforward questions about risk may be at the heart of a professional services practice, today a successful firm must pay attention to so much more. What does it take to mitigate risk and protect the firm? Well, that depends. But if you’re in a leadership position, you’re now likely dealing with business licenses, registrations, taxes, real estate, partnership agreements, annual meetings, financial audits, annual renewals, and more. All of which come with risk.
While they may not be as exciting for the engineer or architect as the work itself, there are some central, top-of-mind areas of concern. Ignoring or overlooking these areas of risk and their potential implications can have significant impacts on your success and your firm’s future:
- Insurance. A simple fender bender on a car today can cost thousands to repair; that wasn’t how it used to be. The same can be said for a minor design error. Unless you have consciously thought about how much insurance you need when the chips are down or have a great broker working on your behalf, you likely do not carry enough insurance for the work you are doing. This is especially true for emerging risks like cybersecurity. Everything costs more now. Knowing that, you need to make sure you have sufficient coverage. Sufficient coverage ensures your business can learn from a mistake and move forward instead of failing and closing its doors due to one overlooked area with a corresponding mistake.
- Contracts. Far too often, I have seen firms sign any contract placed before them – even contracts without the correct entity’s name on them. While that can be a stage of virtually any new business trying to win work, at what point is your business something you need to consciously protect? The contract is a key mechanism for doing just that on every project. Do your contracts place the risk on the party best able to address that risk? If not, are you being paid to assume the risk your client is placing on you? Are the terms even something you can comply with (e.g., occurrence based professional liability policy, etc.)? Most clients understand the need to get the contract right. Provided your ask is reasonable, clients will generally work with you.
- Legislation and regulations. The law is constantly evolving. Are you staying abreast of these changes and petitioning for change for your firm where appropriate by speaking up or actively working with a group speaking on your behalf? Revisions to the law can have detrimental impacts on your business. You cannot ignore them; recently the change to the R&D tax credit under section 174 alone taught that lesson to many firms.
- Policies and procedures. Most firms are struggling to attract, hire, and retain enough skilled workers. In order to do that, firms are paying higher wages and offering more generous benefits in addition to other incentives. Updated policies and procedures can keep everyone on the same page as it relates to expectation, which sets the tone for an open and inviting culture at a nominal cost to the firm. And culture is, after all, what retains people and keeps you from having to rehire at a financial loss.
I encourage you to think of this list like a wellness check and, for each area, ask yourself: How am I doing? How is my firm doing? Are there things we need to do better? Are there things we are not doing at all? Can I manage this on my own or do I need some additional help to make sure the firm and I stay on track? As engineers and architects, you’re well aware of structural risks, but posing these questions can help you become more aware of common yet often overlooked areas of risk.
Kurtis John serves as general counsel and senior vice president for Garver. Connect with him on LinkedIn.
