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Risk: Don't take your eye off the ball

In a tough economic climate it is more important than ever to ensure your company is not at risk of facing a costly claim.Paul Berg of Griffiths & Armour offers some timely advice

In the current recession it would be easy for companies to take their eye off the ball when it comes to managing risk.

However, as Graham Watts, chief executive of the Construction Industry Council, says, the last thing companies need in an economic downturn is to be facing a costly claim. “Now, more than ever, consultants need to turn their minds to the question of risk management.”

The economic climate may make people more likely to instigate claims, but the reasons for these claims will be familiar. They include being too helpful and stepping outside the brief, failing to communicate, biting off more than they can chew, or simply making mistakes in design, most frequently through circumventing established quality control procedures.

Although the idea is anathema for many professionals, the most basic cause of claims against them is a defect in the services they have provided. Most professionals have procedures in place robust enough to catch the majority of errors; it is when these procedures are not properly followed that problems arise. As Antony Smith of Beale & Company Solicitors says: “Engineers are … forever taking on far greater obligations than their contract requires. When the ‘grateful’ client turns nasty they do not remember the enormous effort put in by the engineer – they just expect compensation.”

Situations in which procedures may - inadvertently - be skipped include offering “free” advice, adopting or checking an alternative design, or when a consultant is working under the tight programme pressures of a design and build contract.

In all of these situations, engineers may wish – or feel obligated – to help a client or contractor by giving the nod to a design, or a change in design, that hasn’t been properly thought through. As solicitor Paul Taylor says: “Most engineers are (or see themselves as) problem solvers. The trouble is, these are always other people’s problems and in their desire to help others, engineers create problems for themselves.”

The same “helpful” motivation may account for engineers straying outside their brief - an easy, and often dangerous, mistake to make. Consultants often offer advice on problems that do not relate directly to their area of consultancy, and find themselves drawn into claims they could have avoided.

As Michael Salau, partner at Berrymans Lace Mawer solicitors, says: “Where one consultant’s design ends and another commences remains a fertile source of construction claims.” Whatever the reason for a claim, most involve a failure in communication at some level, either internally or externally. The task of professionals is not solely to produce sound advice based on their technical knowledge and experience, but also to communicate it effectively. Good communication makes the difference between producing a solution and providing a service.

But what should you do if you become aware that others in the team are not communicating as effectively as they might? While it is true that consultants create problems by exceeding their brief, in practice there are circumstances in which doing so is the best way to protect against spurious allegations.

It should be possible to communicate the relevant message in such a way as to achieve this without materially affecting the consultant’s exposure to liability. A carefully worded letter might flag a potential issue to the client and merely suggest, with appropriate disclaimers and qualifications, that the client take further advice.

Jamie Monck-Mason, partner at solicitor Hill Dickinson, says: “Frequently construction professionals run into problems because they are too nice and are therefore reluctant to justifiably criticise other consultants or contractors.

“Sadly, that tends to prejudice them when a dispute arises as to who was responsible, for example, for inadequate or late provision of information.”

This tendency for consultants to be “too nice” or “too helpful” is to be admired, but it can have consequences – especially in a claims-conscious environment – if that tendency leads to ignoring established procedures for giving advice.

This is an overview of some of the issues coverd in Griffiths & Armour’s latest risk management report Reinforcing simple messages. To receive a personal copy visit www.griffithsandarmour.com.