There are 3 kinds of risks: the risk that you’ll get screwed or sued; the risk that you’ll get in a fight and the risk that you’ll lose the fight. These risks are ever present. The only way to avoid these risks completely is to stay on your couch. Even if you can’t avoid these risks, you can minimize their likelihood and impact by jumping up on the Risk Management Stool. The Risk Management Stool sits on contracts, insurance and vigilant due diligence. Below are some tips.
Contracts
- Get contracts in writing
- Make sure contracts are signed
- Include limitations of liability
- Make sure your obligations to indemnify the other guy are narrow
- To guard against stupid law suits, stick in fee shifting (lawyer fees to winner)
- Craft good warranties to establish the acceptable standards (ie: when you’ve done what you need to do)
- Stick in milestones & status reports
- Finish and keep up to date the statement of work
Insurance
- Get liability insurance
- Make the other guy get insurance
- Get errors and omissions insurance
- Consider performance bonds
- Make sure insurance covers indemnities
Due Diligence
- Know your contracts – dates and obligations
- Reserve for do-overs
- Reserve for uncollectable receivables
- Make staff accountable
- Review and probe internal controls
- Checklists, checklists, checklists
- Don’t do business with douchebags
- Keep your ego in check!
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