Contract-Related Risk Management Process

A Contract-Related Risk Management Process is a contract-related process that is a risk management process applied to contractual agreements to identify, assess, and mitigate contract risk events through contract risk representation-items.

• Context:
  • It can be supported by a Contract Risk Management System that can solve contract risk assessment and risk mitigation tasks.
  • It can (typically) involve Contract Risk Identification to create initial contract risk representation-items.
  • ...
  • It can range from being a Centralized Contract Risk Management Process to being a Decentralized Contract Risk Management Process, based on organizational structure.
  • It can range from being a Simple Contract Risk Management Process to being a Comprehensive Contract Risk Management Process, based on contract complexity.
  • It can range from being a Pre-Contract Signature Risk Management Process to being a Post-Contract Signature Risk Management Process, based on contract lifecycle phase.
  • It can range from being a Simple Contract-Related Risk Management Process to being a Complex Contract-Related Risk Management Process, based on process complexity.
  • It can range from being a Reactive Contract-Related Risk Management Process to being a Proactive Contract-Related Risk Management Process, based on timing approach.
  • It can range from being a Basic Contract-Related Risk Management Process to being a Comprehensive Contract-Related Risk Management Process, based on ....
  • It can range from being a Qualitative Contract-Related Risk Management Process to being a Quantitative Contract-Related Risk Management Process, based on assessment method.
  • It can range from being a In-House Contract-Related Risk Management Process to being a Law-Firm Contract-Related Risk Management Process, based on execution context.
  • It can range from being a High-Level Contract Risk Management Process to being a Contract Risk Management Workflow, depending on ...
  • ...
  • It can include Contract Risk Assessment to evaluate contract risk probability and contract risk impact.
  • It can be a part of Contract Governance, Risk Management, and Compliance Process.
  • It can be modeled by a Contract-Focused Service Company, such as contract-tech company (with a contract-tech strategy).
  • ...
  • It can manifest through Contract Risk Management Phases:
    • Contract Formation Phase: managing contract formation risks through:
      • Contract Drafting Risk Control: addressing drafting error risks
      • Contract Negotiation Risk Control: managing negotiation risks
      • Contract Approval Risk Control: handling approval process risks
    • Contract Performance Phase: managing contract performance risks through:
      • Delivery Risk Control: addressing delivery failure risks
      • Payment Risk Control: managing payment default risks
      • Quality Risk Control: handling quality shortfall risks
    • Contract Compliance Phase: managing contract compliance risks through:
      • Regulatory Compliance Control: addressing regulatory risks
      • Standard Compliance Control: managing standard breach risks
      • Reporting Compliance Control: handling reporting gap risks
  • It can be composed of Contract Risk Management Sub-Processes, such as:
    • Law-Rocused Contract Risk Management Processes: analyzing legal contract-related risks
    • Financial Contract Risk Management Processes: assessing financial contract-related risks
    • Technical Contract Risk Management Processes: evaluating technical contract-related risks
    • Operational Contract Risk Management Processes: examining operational rcontract-related isksj.
  • It can involve Contract Risk Control Methods:
    • Contract Clause Control: using risk mitigation clauses
    • Contract Process Control: implementing control procedures
    • Contract Monitoring Control: establishing monitoring systems
  • It can be supported by Contract Risk Management Systems.
  • ...
• Example(s):
  • Contract Type-Focused Contract Risk Management Processes (for contract types), such as:
    • Construction Contract Risk Management Processes (for construction contracts).
    • Software Development Contract Risk Management Processes (for software development contracts).
    • Supply Chain Contract Risk Management Processes (for supply chain contracts).
  • Industry-Specific Contract Risk Management Processes (for industry sectors), such as:
    • Healthcare Contract Risk Management Processes managing healthcare contracts with regulatory compliance risks
    • Financial Services Contract Risk Management Processes handling financial service agreements
    • Energy Sector Contract Risk Management Processes addressing energy supply contracts
  • Stakeholder-Specific Contract Risk Management Processes (for contract stakeholder types), such as:
    • Vendor Contract Risk Management Processes managing vendor agreements
    • Customer Contract Risk Management Processes handling customer contracts
    • Employee Contract Risk Management Processes addressing employment agreements
  • ...
• Counter-Example(s):
  • Unmanaged Contract Processes without systematic risk controls
  • Standard Form Contract Processes with fixed terms without risk assessment
  • Informal Agreement Processes lacking formal risk management
  • Contract Administration Processes focused only on routine management
  • Contract Compliance Processes limited to regulatory requirements
• See: Contract Risk, Contract Management, Risk Management Process, Contract Risk Framework, Contract Governance

---

---

References

2024s

• (Zoho, 2024) ⇒ Heleena (2024). "Contract risk management: All you need to know". In: Zoho Contracts.
  • QUOTE: Contract risks exist in various forms and can occur for various reasons, including ambiguous contractual terms, unfulfilled obligations, financial instability, or non-compliance with laws and regulations(...)

    (...) Contract risk management is the process of identifying, evaluating, and mitigating potential risks associated with your contracts and contract management process.

    A comprehensive approach to contract risk management includes:

    • Identifying and analyzing all potential risks.
    • Developing effective risk mitigation strategies.
    • Monitoring the implementation of those strategies.

2024b

• (Caburao, 2024) ⇒ Eunice Arcilla Caburao (2024). "Contract Risk Management: A Complete Guide". In: SafetyCulture.
  • QUOTE: Contract risk management is a proactive and systematic approach that identifies, assesses, and mitigates risks associated with contractual agreements. This strategy is essential to ensure that obligations, responsibilities, and liabilities are clearly defined and manageable, protecting organizations from financial, legal, operational, and reputational issues.

2024c

• (Superlegal.ai, 2024) ⇒ Growth Superlegal (2024). "An Expert Guide to Contractual Risks". In: Superlegal.ai.
  • QUOTE: Contract risk refers to the potential for loss or negative outcomes resulting from the terms and conditions within a contract, or from the failure of parties to comply with these terms. This risk can arise from a variety of sources -- financial obligations, performance stipulations, or legal compliance issues.

    When a contract is not thoroughly vetted or if its terms are not clearly understood and managed, businesses can face significant liabilities. For example, if a supplier fails to meet delivery deadlines, it disrupts the supply chain and leads to breach of contract claims and financial penalties.

202d

• (Icertis, 2023) ⇒ Icertis Team (2023). "What is Contract Risk Management?". In: Icertis.
  • QUOTE: Contract risk management is the process of assessing a contract's maximum value through compliance tracking by identifying, managing, and minimizing the potential risks throughout the contract lifecycle. This may include loss of opportunity, legal exposure if things go wrong, and potential business impact the contract will have on the involved parties.

---