Lesson 7: Risk Management

Most people don’t think the risk management section of a tender is important, but boy would they be wrong. This section allows you to show you understand the practical risks of the project, but also how you are going to mitigate and minimise them.  

Risk management plans and strategies can include: 

  • Financial – what strategies do you have in place to manage cash flow? 
  • Commercial – what agreements do you have in place with your suppliers? What procedures do you have in place if one of your suppliers is unable to meet your requirements? 
  • Human resources – what strategies do you have in place for succession planning or recruiting new staff? 

By defining the risk management processes of your company, you minimise and eliminate negative risks, meaning projects can be finished on time. It also allows you to meet your budget and fulfil objectives. Good risk management strategies allow your company to maximise profits and minimises expenses on things that don’t produce any return on investment.  

Risk Management Methodology 

If you have in place a risk management methodology, then don’t forget include it in your response. This will demonstrate to the client that you have a structured process for managing and mitigating risk, again providing reassurance that your company is capable of managing any contract risk. 

Risk Management Strategies 

Strategic risk management is the process of identifying, quantifying and mitigating any risk that affects or is inherent in a company’s business strategy, strategic objectives and strategy execution. Risks may take the form of: 

  • Shifts in consumer demand and preferences 
  • Legal and regulatory change 
  • Competitive pressure 
  • Merger integration 
  • Technological changes 
  • Senior management turnover 
  • Stakeholder pressure 

Whatever the risk may be, managing it is vital for any contract, especially new ones. Once you have determined what the risks are, you’ll need to develop a strategy for dealing with each risk – if and when – it comes into play. The risk may be very low and never occur, but that doesn’t mean you don’t have to address it. 

The most common approach for managing risk is mitigation. The following are examples of risk mitigation: 

  • Minimise the chances that the risk will occur. Take actions to reduce the chances that an undesirable situation will occur. For example, consider you have a person on your project who’s new to your company. Consequently, you feel the person may take longer to do their assigned task than you planned. To reduce the chance of the person requiring more time, explain the task and the desired results very clearly before they begin to work on it. Furthermore, develop frequent milestones and monitor their performance often so you can deal with any problems as soon as they occur. You can also have them attend a training course to refresh the skills and knowledge they need to perform the assignment. 
  • Develop contingencies to minimise the negative consequences if an undesirable situation does occur. Imagine you plan to have your organisation’s publication department reproduce 100 copies of the manual for your training program. If you’re concerned the department may have higher-priority projects at the same time, locate an external vendor that can reproduce the manuals if need be. Finding the vendor beforehand can reduce any time delays resulting from the need to switch to another resource. 

Risk Management Plan 

The purpose of the Risk Management Plan is to detail your company’s process for identifying, assessing and implementing strategies to mitigate risks that may arise during the transition, implementation and delivery of services for the contract. 

The Risk Management Plan outlines the actual or potential risks of the project. It then details how you would approach the risks and what strategies you would put in place to mitigate or eliminate the risks. It’s also good to indicate the probability of the risk occurring, i.e. low/medium/high. 

The Risk Management Plan should be tailored for each contract as it should address specific contract deliverables. 

Activity

Use the Risk Management Plan provided to customise to your business and your brand.