Financial peril for IT consultants

21 Feb 2006

Smaller IT consultants are leaving themselves open to large financial claims and are placing their careers and personal assets at risk due to inadequate insurance cover, it has been claimed.

Mark Phelan, managing director of BHP Insurances, said that with the trend towards the outsourcing of IT services by businesses, mistakes by IT contractors can be very expensive. Phelan’s company provides professional indemnity insurance for IT freelancers, contractors and small consultancy firms with an annual turnover of less than €300,000.

According to Phelan, some of the dangers facing IT consultants are: the potential upload of a computer virus could cost a company €1m to restore data and software; a consultant being sued for accidentally wiping data; and supplying software that infringes intellectual property rights.

Other possible dangers include failing to integrate a new system, delivering a system that did not meet a client’s brief or a person being defamed by a remark logged into a company’s website.

“Unfortunately many small IT consultants don’t really consider the risks involved in working with volatile computer technology such as programming code, network installation and management, and system integration,” explained Phelan.

“All it takes is one simple human error and one dissatisfied client to place a professional’s career and personal assets at risk.”

By John Kennedy