Managing risk under commercial contracts

  • Having a contract risk assessment process in place can help ensure that organisations take a proactive and preventative approach as opposed to one that is reactive and reparative.
  • Once a risk assessment has been completed an organisation will need to decide which risks it can disregard and which risks it will need to manage.
  • A risk assessment is a working document and should be regularly reviewed and updated.

Hands above contract on clipboard

Managing risk under commercial contracts without proper guidance can be daunting. Not only will there be the need to consider productivity and business drivers — such as the desire to increase revenue and reduce costs — but from a legal perspective, there is the ever-present need to avoid disputes and litigation.

There are a few general principles that can assist with establishing a governance process around an organisation’s commercial contracts. Having such a process in place can help ensure that the management of risk under those contracts is a relatively straightforward and cost-effective exercise. If risk is properly managed at the front-end of contract negotiations, it may be possible for an organisation to avoid (or at least be in a position to carefully manage) potential disputes and litigation.

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