Managing Risk With Contract Management

Managing risk is an essential function for contract managers

, no matter what industry they work in. Here's how you can use your own business savvy and contract manager software to mitigate risk in your own business relations.

Why is contract management important?

In theory, it's possible to do many things without signing the right contract, anything like hiring external labour can be a minefield without the right preparation. However, this is a risk bigger than most business owners or administrators are willing to take, and for a good reason. If your project goes awry, resulting in lost funds, lost time, or -- even worse -- an injured party, you could be held responsible legally if the court finds that you were negligent in your preparation for the work. And since legal negligence can come with a hefty fine or the responsibility for legal or hospital fees, it's a gamble that could result in you losing your business.

How can I minimize risk with contract management?

As a rule of thumb, most businesses attempt to distribute risk to other parties involved in the contract to minimize the amount of liability for themselves. Ideally, risk is best handled by the contract party with the proper resources to address it, however, there's another factor that often comes into play when distributing risk. What tends to happen is that the one who holds the cards in negotiations is able to decide the risk factor they want, with the remaining parties distributing any further responsibilities.

What are the contract management tools used to mitigate risk?

The first step of minimizing risk with your contracts is requiring all the appropriate documentation from contractors and implementing a thorough screening process to make sure that they have all the training and resources necessary to complete the job. Furthermore, you can get effective solutions to your contract management through some of the clauses that can be used.

Indemnification clauses are a common tool used by contract management systems to ensure that businesses are not liable for damages or losses that may occur throughout the completion of a project. These clauses usually place responsibility on subcontractors. The indemnity clauses can usually only be inforced when the contractors in question have the right coverage of insurance that correlates with that part of the contract.

One of the big selling points of a contract management system is that by staying on top of things, you can make sure that your deals are in the right budget and time frame as initially stated. To do this, some businesses include a clause in their contracts known as "no damage for delay." These provisions generally allow for an extension to finish the project if the original time table is not sufficient but without additional pay from the primary party.

And to tackle the issue of payment, most contract solutions involve a pay-when-paid clause which establishes a time of payment. However, to manage risk, some businesses will include a pay-if-paid clause, which actually states that the contractor will only be paid upon completion of the requirements described in the contract.

Most of these provisions can be expertly enforced with the help of effective contract manager software . If you know how risk management works, you can put yourself in a better position to get what you want out of a working relationship, no matter which side of the contract you are on.

by: Terry Philips

POST COMMENT

Rough Day? Tear Open Some Product Packaging Encouraging Individuals To Look For Help Or Rehabilitation Managing The Stakeholders In Project Management How To Keep Your Skin From Aging A Closer Look At Aluminium Packaging Observe Nocturnal Wildlife Through Thermal Imaging Cameras Helpful Tips To Ease The Aging Process 8 Tips For Managing Stakeholder Expectations An Anti-aging Hgh Product Anti-aging Cream: The Best Your Skin Can Get Landscapers Salvaging Outdoor Living Botox V/s Anti-aging Creams Ultoo, Redefining The Messaging Arena