The management of risk for any business is a critical activity and inadequate risk management can have significant financial consequences.
When reading a quote or tender document (including any proposed draft contracts), take the time to assess how risk is being allocated between buyer (the Government agency) and the supplier (your business).
Make sure you clearly understand what risk you are taking on and how you can mitigate these risks.
Contract Risk Assessment
Things to consider when assessing risk in government contracts includes:
- Liability provisions
- Remedies for late or non-delivery
- Insurance requirements
- Ownership of intellectual property.
Remember, there is a connection between the level of risk your business takes on in a contract and the price you charge. In simple terms, the higher the risk, the higher the return you should be seeking from the contract.
Most procurement processes provide an opportunity to negotiate the final contract, so if your assessment identifies a high-risk/low-return, this is the time to negotiate the price. You should always ensure your risk allocation is commercially acceptable and financially viable, including if things go wrong.
Quick Tip
If you are uncertain about your risk exposure or how risk is captured in a proposed contract, you may wish to consider seeking legal or commercial advice.
Helpful Resources
Risk Management
For more information on understanding and assessing you business’ risk, refer to these Risk Management guides and tools for support.
