10 Common Risks Impacting Design Professionals


In the changing world of design and construction, design firms must protect themselves against emerging risks to best ensure long-term success. Here are 10 common risks that architects, engineers and other design professionals should be aware of now and into the future.
1. Rising material costs
Rising material costs have become the norm in the design industry. This trend is driven by a complex array of conditions, including economic inflation, supply chain issues, increased demand and raw material shortages.
These conditions make it difficult for design professionals to forecast material costs, which can lead to budget overruns. Rising costs may also require changes to the project design and specifications. If the rising costs are associated with supply chain disruptions, the project may be delayed. Depending on contract terms and jurisdiction, these outcomes can lead to claims of professional negligence.
2. Lower-quality materials
While lower-quality materials may seem like an economical choice to some, using them could lead to project delays and higher repair and replacement costs. The long- and short-term consequences may include:
- Structural issues.
- Safety and health hazards.
- Failure to function as intended.
- Reduced energy efficiency.
- Premature degradation.
Additionally, if a lack of quality causes safety incidents or code violations, responsible parties may face legal liabilities and financial penalties.
3. Contract terms that expand professional duties
When drafting contracts, project owners may try to shift unreasonable risks to the design professional. For example, an owner might ask a design professional to warrant or guarantee certain outcomes that extend beyond the scope of their professional duty. These provisions often go unchallenged but can lead to significant exposure because professional liability policies generally exclude coverage for duties that are contractually assumed and exceed the professional standard.
A design professional who accepts contractual terms that extend their standard professional obligations may not enjoy the full protection of their professional liability policy. This could leave their firm exposed in the event of a costly design defect.
4. Copyright infringement
In the age of technology, it’s easy to copy and distribute copyrighted content such as building plans and specifications, architectural sketches and renderings, and photographs. And it’s difficult for copyright holders to maintain control over their works.
In the design profession, copyright infringement is sometimes a deliberate and unlawful act. More commonly, however, it’s unintended and occurs when one design professional is hired to complete or extend a project initiated by another. If a lawsuit is filed, the costs can be significant in terms of legal fees, potential judgments and project delays.
5. Importance of proper licensing
Licensure is crucial for maintaining standards and professionalism in the design profession. It offers evidence of competency, enhances client trust and helps projects meet the quality, safety and legal standards established for the design industry.
Practicing without a license can result in legal penalties, lawsuits and difficulties obtaining professional liability insurance. It can also prevent individuals or businesses from being able to file permit documents, since the permitting process requires the stamp or seal of a licensed design professional. An inability to file permit documents can lead to project delays, claims and other liabilities.
6. Errors and omissions
Errors and omissions are inevitable in design projects. Even the most experienced architects and engineers can’t guarantee perfection in the plans and specifications they deliver to clients. But unintended mistakes – in design plans, specifications or project oversight – can have a significant impact on the overall success of a project. Potential negative outcomes include structural problems, project delays, safety issues, costly overruns, disputes and legal action.
Firms that face a professional liability claim may be exposed to significant costs. This is particularly true in the current era of social inflation, which is leading to increasing jury awards that far exceed the rate of economic inflation.
Professional liability claims can also cost design professionals precious time and resources, shifting focus away from clients and day-to-day operations.
7. Labor and salary pressures
Design firms – and the construction industry at large – continue to face labor shortfalls. They also struggle with the ongoing challenge of attracting and retaining qualified, reliable employees and contractors. Multiple factors contribute to these trends, such as:
- Many experienced design professionals are retiring.
- Fewer workers are entering the field to replace those who are leaving.
- High demand for design services is outpacing the available workforce capacity.
- Wages may not be competitive or in line with the demands of the job.
Worker shortages can force firms to hire consultants and employees who aren’t qualified or lack necessary experience. Employing staff with less expertise can lead to project slowdowns, compromised standards and quality and a greater risk of lawsuits and insurance claims.
8. Lack of innovation
Design professionals are sometimes cautious about proposing innovative designs because they may carry unforeseen risks. However, many clients expect modern ideas and solutions. If a proposed design is perceived as substandard or outdated, dissatisfied clients may demand rework or take the project elsewhere. In severe cases, they could pursue legal remedies. Additionally, design professionals may face legal issues if a lack of innovation results in designs that don’t comply with the latest codes, standards or other regulatory requirements.
9. Environmental impacts
Severe weather presents an ongoing risk for design professionals. Recent changes in weather patterns challenge design professionals to anticipate the potential effects of climate change and build greater resilience and sustainability into their designs.
Rising temperatures and sea levels, along with extreme weather events, are among the environmental circumstances that must be considered. Failure to do so can lead to claims of negligence if projects are affected by weather-related incidents. Noncompliance with new climate-related regulations can also have legal and financial ramifications.
10. Negative publicity and reputational harm
All the previously mentioned risks can result in reputational harm, especially when a design flaw leads to a high-profile project failure that attracts public attention. When public or government projects are involved, the news coverage may be particularly damaging.
Negative publicity can bring long-term consequences that affect a design firm’s ability to attract and retain clients, secure projects and maintain a positive standing in the industry. And repairing a firm’s reputation can be complex and expensive, often involving efforts such as:
- Public relations campaigns.
- Rebranding initiatives.
- Ongoing investments in client relations and quality assurance.
How design professionals can minimize risks
These 10 common risks are just some of the exposures that design professionals may face. While they can’t all be eliminated, they can be minimized through:
- Rigorous risk management practices.
- Careful contract drafting and review.
- Compliance with industry standards.
- Effective client communication.
- Liability insurance designed specifically for design professionals.
Having trusted expertise and guidance helps as well. Travelers understands the unique challenges of the design field, which is why we offer professional liability protection tailored to the exposures that design firms often encounter. And firms receive further support to help protect their business with resources that include:
- Robust risk management tools, including contract guides and advisory bulletins.
- Industry-recognized claims handling and responsiveness.
- A highly experienced underwriting team.
- Risk management education site with podcasts, articles, webinars, videos and more.
Ready to discover more about how Travelers can help safeguard design firms? Contact your local independent agent or broker today.