Recognizing Risk

RUNNING HEAD: RECOGNIZING CONTRACT RISK

Recognizing Contract Risk

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University of Phoenix

Contracting Risk

In today’s business world, there is a risk of litigation coming from contracts. Most litigation in the commercial arena stems from breach of contract or misrepresentation (News, 1999). There are various techniques to reducing the risk of litigation in the use of business contracts. A company can create a risk management team, standard company policies are created and finally alternate dispute resolutions can be used before litigation.

Risk Management Team

The first method used to reduce the risk in contracts is the creation of a risk management team. This team has the power and responsibility to negotiate the contract for the company. Clear company policies would out line the methods used by the team to negotiate a clear contract for the company (News, 1999). Any contract between the company another entity would be reviewed by this team to ensure the policies of the company are being followed.

The risk management team would consist of subject matter experts covering the potential aspects of the contract. The team would be involved in the creation of the contract in concert with the section of the company working with the outside entity. It is critical all parties understand there is no implied contract though the negotiation process, and only the final signed contract will be used (News, 1999).

The final job of the risk management team is to review contracts, which are already in place. These reviews will used to catch potential problems before they reach the level of a potential breach of contract (Dave Zechnich, 2009). These teams will have the authority to renegotiate contracts as situations dictate the changes. These changes can be a change in requirements, a change in time schedule or changes in compensation.

Standard Policies

The next item a company can use to reduce contract risk is to create standard company policies to be used...