Guest Post by Jodie McDonnell
A report from the Management Consultancies Association (MCA), the representative body for management consultancies in the United Kingdom, has highlighted the importance of taking action to protect your business during difficult trading conditions.
As a sign of the times, 76 per cent of clients are now transferring project risks to their consultants, state the MCA. Their research suggests that risks faced when delivering consulting and outsourcing projects over the past two years have increased, placing the financial security and company reputations of consultancies in danger. With difficult business conditions also being experienced across the pond, it follows that business consultants operating far and wide should be prepared.
What Professional Indemnity Insurance covers
While some businesses in the United Kingdom are required by law to protect themselves from a level of risk by taking out Professional Indemnity Insurance (PII) and meet minimum levels of cover, this is not always the case. PII protects management consultants against potential claims of neglect, error or omission from clients.
It also covers the cost of making a legal defense and paying compensation for such claims. Through PII management consultants can cover their business against errors – alleged or actual, which have occurred due to negligence, breach of duty or civil liability; however it does not cover deliberate errors.
Where to find coverage
As a management consultant, like other professionals operating within an advice-driven industry, in order to protect your business from the potential impact of rising risks you should consider your insurance options. Take time to speak to experts and find tailored indemnity & liability insurance for management consultants to meet your needs.
Established specialists such as Markel will be happy to guide you through your options and help you decide on your level of protection. Be aware however; under-insuring in this area in the current climate could potentially mean losing the financial security of your business. In addition, it is worth remembering that many governmental organizations require a particular level of coverage to be taken by consultancies in order to tender work to them.
21st Century realities of management consulting in the UK
It is hoped that the use of management consultants by the public sector could see a boost in the future following the latest MCA report “Responding to austerity: How Britain’s public and private sectors used consulting in 2010 both the private and public sector reduced their total spending on management consultancy services in 2009 and 2010 respectively”.
The report showed that the expertise of consultants was used during the period by the private sector to help in the restructuring of businesses in order to give them a sustainable future, while public agencies cut down on the use of consultancy services that could help deliver long term savings and increased productivity.
Alan Leaman, Chief Executive of the MCA, said:
“Looking at the findings of our report it is difficult to avoid one conclusion: ministers and officials have fixed on the wrong target. Their short-term desire to be able to say that they have reduced spending on consultants has taken priority over the larger and more important job of delivering the large-scale changes that are needed to cuts costs in the long-term and improve public services.”
“What we need is a radical change in the way government buys and uses consultancy. Their priority should be to deliver the outcomes that the public wants – lower costs and improved services. This will require a major push to increase public sector productivity. In many cases it will also make clear sense to use the skills and knowledge that management consultancies provide.”
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