Posted by Robert Phelan on Fri, Dec 04, 2009 @ 07:58 AM
Whenever we watch modern-day spy and war movies, it seems that C4 is the explosive of choice on most missions. It's a plastic explosive which means it can be molded into different shapes depending on its intended use, and it's extremely powerful, 1.34 times the explosive power of TNT. When it is detonated, gases are released at 26,400 feet per second. Everything nearby disappears.
What does this have to do with how contractors manage risk? As I've said earlier, I want to make this insurance and risk stuff easy to remember. C4 the explosive destroys everything. C4TM, the contract compliance process, is what you need so your business isn't destroyed. I know that is a reverse analogy, one C4 destroys and the other protects but I just want you to remember my C4TM and here's what it is:
1. Contract
2. Compliance
3. Certificate of Insurance
4. Check
There it is. Four simple steps. Not too complex. Easy to remember. No insurance mumbo jumbo. Just four easy words to remember.
Not so fast. There is a lot of process embedded in those words. Each one is a critical element. Leave out any one of them and the whole thing falls apart. If that happens, you're the one left with all the risk.
In the next four posts I'll dig deeper into each one of these elements. Then you'll know how to work with your Risk Advisor to build your own process. This blind side will be protected and you can move on to others where your Left Tackle may be missing.
This video shows just how little C4 can cause a huge damage to a structure, and begs the question of how much C4 are you ignoring when you sign construction contracts?
Posted by Robert Phelan on Thu, Dec 03, 2009 @ 09:40 AM
In an earlier post I talked about Lawrence Taylor's impact on football strategy. LT's aggressive attacks on the quarterback dramatically increased the importance of the Left Tackle position. Since the quarterback is the most valuable asset on the team, the Left Tackle became equally valuable as the position protecting the QB's blind side.
Contractors have literally hundreds of blind sides. Over the course of the next few months I'll be detailing them here. I want to start today with what I think is one of the most important yet overlooked blind sides to most contractors. Contractors are called contractors for a reason. They sign contracts to build things. Risk is transferred in those contracts and that's when it can get ugly.
One of my goals in this blog is to simplify some of the concepts related to risk so that contractors are more conscious of them. Here's a formula I want you to memorize:
RT = LT
Translated, that means Effective Risk Transfer = Your Most Important Left Tackle
When you sign a contract, you have upstream obligations and most of you hire some subs and create downstream obligations. The complexity of contracts today and their insurance requirements turn this into a minefield. Once risk starts to get transferred, it's anybody's guess who will get left holding the bag in this high risk game of musical chairs.
When it comes to contracts, an experience and well-trained Risk Advisor is the Left Tackle you need to have on your team. You need a specialist who is reading construction contracts every day. Someone who understands the legal as well as insurance aspects of construction agreements. Over the next several posts I will discuss a process that your company needs to follow on every contract.