Risk management is an essential function in the activities under contract management as every term or condition in a contract has its own level of risk to the organization. It is part of the responsibility of a Contract Manager to weigh the risks involved in each term in a contract and keep the management aware of the risks involved. Once contracts are signed, the Contract Manager should have a contingency plan to mitigate the risks involved in such contracts thereby avoiding costly outcomes to the organization.
There are four areas of contract risk, in general: Financial, Operational, Business Conduct and Force Majeure. Systematically identifying, analyzing, treating, and monitoring the risks involved with a robust Risk Management framework in contract management and processes will enable businesses to respond to challenges with greater agility and resilience. A Contract Manager’s ability to realize the risks, risk levels involved and to implement risk mitigation steps would greatly increase the proficiency of his career in contract management. This brings an opportunity for the professional growth of a Contract Manager.