The Top Risks Architect Firms Need to Be Aware of
The COVID situation has hurt businesses across the globe rather drastically. To get through the crisis, you have to show determination and perseverance apart from ensuring that your services are competitive enough in your field.
The situation has also left most businesses vulnerable financially, which is why you should take even more care about risk protection now, especially so that you can protect your business’s finances from taking a hit.
Taking the right kind of insurance for architect is one of the very first steps you can take when you set up your firm. The next step is to educate yourself about the potential risks so that you are well equipped to avoid and protect yourself from them.
The major risks an architect’s firm should be wary about are as follows:
- Cash flow risks:
This is one dreaded risk that even the most well-established architect’s firm can run into. If yours is a sole proprietorship with a very limited staff, then you may not be able to take on multiple projects at the same time.
This means there is a gap between projects and over this period, you have to go without a steady stream of income flowing into the business.
Another example of a situation where cash flow may be problematic is when the client is in financial trouble and fails to pay or when a situation arises where you cannot possibly complete the work.
Hence, the project is halted, and the cash stops flowing in. Remember that even in such circumstances you may have to meet certain minimum expenses within your firm (e.g., rent and salaries).
- Delays in construction:
Delays in the work completion are highly likely to draw the ire of clients and result in litigation. It may not always be possible to avoid delays, no matter how diligently you make all arrangements.
For example, in an unprecedented lockdown situation like we are undergoing now, transport of materials, availability of construction essentials, and labor. Any of these can be disrupted, and these disruptions can inevitably lead to delays. Unless your contract covers such unexpected contingencies and covers you in such a case, the client may be well within their rights to file a case against your firm.
- Risk arising from contractors:
In many projects, you have to hire contractors to do a certain part of the job. Even in small projects, you may have to hand over a portion of the job to an independent service provider who specializes in the area.
In such cases, you may be held liable for any mistakes committed by these third parties if your contract with the client is framed in such a way.
A good way to avert this risk is to hire contractors you are familiar with and have worked with extensively in the past. If this is not possible, choose contractors who have a sound reputation in the marketplace.
- Inherent risk in increasing transparency:
Clients are increasingly demanding greater transparency from their architects and so, offering the same makes you a preferred choice for them and boosts your chances of getting more projects.
Transparency also boosts your reputation and adds to your credibility and goodwill, which is a good long term investment. However, there are some inherent risks that you should be aware of here, especially with respect to transparency about construction materials.
For example, a building occupant or the client may file a claim that you were aware of (but did not avoid) certain substances in the material that caused him some harm. This is especially high risk in the current environment where the demand for green, safe buildings is rising.
Given that risk aversion is such a critical aspect to focus on, this should be one of the first steps you take when setting up your architect’s firm. For any business, risk protection is carried out by taking out comprehensive insurance coverage, but it is not enough to simply protect your assets with insurance that financially covers losses sustained in a fire or burglary or similar events.
What you should consider as the owner of an architecture business is a comprehensive insurance plan that is designed to help you mitigate possible risks that may arise during the course of your work.
An architects’ professional liability insurance cover is one form of cover you should consider. It comes into play when a client files a legal suit against you for damage or harm sustained by them arising from your services or advice. For example, if your client files a lawsuit against you for delaying the completion of his office space by two weeks, you may have to pay up a hefty sum in damages if the judgment goes against you.
However, with an architects’ professional liability insurance cover, these costs will be covered by the insurance if you are found liable. You can check this website for more details about professional liability insurance.