At Griffiths & Armour, we have often spoken about the trading environment within the construction sector and how decisions on the apportionment of risk can create real problems for consultants. It is important to stress that these are not just our views - they reflect a much wider body of opinion around the management, or perhaps mismanagement, of risk within construction.
In our soon to be published Whitepaper, ‘Construction change: evolving the status quo or time to re-set?’, we share feedback from a series of roundtable events across the UK and Ireland, which involved construction consultants, professional bodies (including IStructE) and other industry stakeholders. The purpose of those events was to capture current sentiment, shine a light on the challenges and identify possible solutions. We are very grateful to all those who participated and we hope the Whitepaper will serve as a catalyst for positive change.
A game of chance?
One comment that come back from the roundtable sessions was the assertion that ‘engineering is becoming a game of chance’. While some may view this as overly pessimistic, it likely reflects the sentiments of many firms.
All too often, we see engineers and other built-environment professionals:
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Pressured to accept liabilities that are well beyond what could be considered ‘reasonable’;
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Drawn into multi-million-pound disputes on projects where fees could be as low as a few thousand pounds;
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Facing the existential threat of being unable to secure PI cover due to claims, exposure to certain sectors or conditions within the wider insurance market.
In many cases, firms find themselves in these situations through no fault of their own and, when problems arise, they are often left asking what more they could have done.
We all know about challenges in the PI market over the past few years but we still need to ask ourselves:
These are the questions I will be looking to address at the SME Business Practice conference on 10 October.
Managing risk and PI insurance
Key to better outcomes and increased resilience is better decision making - whether that is about how we manage risk or the choices we make when it comes to PI insurance.
In a hardening contractual landscape, it has never been more important for firms to understand their exposures and to make informed decisions about the risks they’re taking on. That’s why I, and my colleagues at Griffiths & Armour, work closely with our clients to address risk issues, particularly at the appointment stage. Effective risk management is so often about doing the simple things well - it will reduce your exposures; it will build resilience and, yes... it can also deliver better outcomes on your PI insurance renewal.
As previously reported to IStructE members, the PI insurance market is beginning to level off. In our experience, underwriters are engaging positively with clients and there are some signs of increased appetite. That is good news - an improving PI insurance market will bring more choice but even in an improving market, firms need to be careful that they’re getting the right coverage.
So, it is worth considering what is going to guide our choices:
They are the kind of questions we are considering all the time, and I am looking forward to speaking at the SME Business Practice conference on 10 October about the decisions I face as a specialist PI broker, the balance I must achieve when structuring a PI programme and the dangers of getting it wrong.
Underlying risk
Of course, as also reported elsewhere, changes in the PI insurance market are largely the product of the usual insurance market cycle - they are not the result of any fundamental change in underlying risk. And therein lies the problem: until we see change in the risk environment, the PI market is unlikely to deliver the level of certainty and long-term stability we would all wish to see, and construction consultants will continue to be exposed.
Which brings me back to our ‘Constructing change’ Whitepaper. For all the good work that firms are doing to manage their individual risk, there is only so much they can achieve against the backdrop of an industry that seems determined to dump risk onto those who are least able to control, carry or fund it.
Our hope is that the Whitepaper will support the IStructE (and other industry bodies) in their efforts to improve the legal, commercial, and regulatory environment members are operating in. Helping individual firms build resilience and creating a construction sector environment that better serves the interests of society.
I’m looking forward to exploring these themes at the SME Business Practice conference on 10 October and would welcome any thoughts that members may wish to share in advance.
Tanya Winstanley is Partner & Group Director at Griffiths & Armour, and she will present at the upcoming SME Business practice conference.
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