In a world increasingly marked by uncertainty and deep change, risk management is a priority for any business that legitimately cares about preserving its stability, its growth and its reputation. This strategic element is spreading further into every area of company activity, and not least into contract management. The contract manager is therefore led (or is wired, depending on their profile) to build this notion and the associated skills further into their remit. Some will point out, quite rightly, that “risk management” and “contract management” (or contract administration) are different jobs calling for different skills, but at Prime Conseil we are convinced that having this string to your bow is essential and helps ensure the viability and success of projects over the long term.
“Risk management” and “contract management”: shared objectives
Risk management is a process for identifying, assessing and mitigating the risks that can affect an organisation. These risks can take various forms: financial, operational, strategic, compliance or political risks, or risks tied to unforeseen events such as natural disasters. The aim is to anticipate, assess and manage them in order to mitigate their impact on the company's business and its continuity.
Broadly, this proactive approach breaks down into 4 main steps:
- Identifying risks: this means establishing a context, understanding the organisation's environment and objectives, and identifying the actual and potential risks to which it might be exposed. The approach covers both internal risks, such as operational issues, and external ones such as market volatility in times of crisis, supply chain disruption, cyber attacks, and so on.
- Assessing risks: once identified, risks are assessed in terms of likelihood of occurrence and potential impact. This assessment makes it possible to rank risks by importance and urgency.
- Mitigating risks: the assessment allows mitigation strategies to be put in place to bring risks down to a level judged acceptable. That can include preventive measures, workaround plans, adapting insurance cover, resource planning, and effective coordination of stakeholders, which relies on clear communication about the status of risks.
- Monitoring and reassessing risks: risk management is a continuous process. As risks evolve, they and the measures put in place must be reassessed so that the approach can be adjusted against the company's objectives.
Good risk management surfaces risks and threats, but it also reveals where the opportunities lie and which actions support the durability of the business. Here we find the objectives of contract management in its operational sense, namely limiting potential disruption and financial loss, and supporting revenue generation by creating an environment conducive to business.
What skills make a great “Contract Risk Manager”?
Risk management and contract management are closely linked and reinforce one another. We all know that risk is an integral part of any project and that the contract manager (or, more generally, any project manager) will face it sooner or later. Since taking risk is unavoidable in business life, it is necessarily unavoidable in managing contracts.
By building a risk management approach into contract management, the contract manager brings an agility that will necessarily contribute to the profitability of the project and also, as we see regularly, to strengthening trust in the commercial relationship.
So, at a time of the many upheavals we are living through, what are the main qualities the contract manager should strengthen or add to their toolkit in order to guide the company's strategic choices perfectly? We set out a list, plainly non-exhaustive, for embedding the reflex of managing uncertainty into the contract manager's approach.
Technical skills:
Strengthening technical skills in the financial, accounting, legal or environmental fields is a necessary asset for detecting risks more easily and supporting decision-making, particularly when it comes to provisioning for risk.
Analytical skills:
Being able to analyse complex situations and data while anticipating the potential impact of risks against the objectives set. The contract manager builds the risk identification and assessment phases into their method from the very start of the project. Handling this at the preliminary stage, by applying the SWOT method for example, will make it possible to shape the bid better, to choose partners and to prepare the coming negotiations with knowledge of internal strengths and weaknesses, external threats and opportunities, and priorities.
A strategic vision:
Aligning risk management with the overall objectives of the project. This means understanding how risks can influence long-term strategy. The contract manager must put forward proposals, bring pragmatic solutions (pragmatism being another important quality) and highlight the opportunities that may follow in order to offset the risks. It is important not to see risk solely as a source of problems, but above all as a revealer of opportunities.
Communication:
Being a good communicator is probably the key to this entire process. Communicating risks effectively to decision-makers is crucial and reassuring. It requires sharing clear, relevant and transparent information and fostering a shared understanding of what is at stake. That will support better decision-making and maximise the chances of the project enduring.
As you will have gathered, this is about adding the risk factor to skills you probably already master perfectly, and turning it into a reflex.
Conclusion
Risk management is a discipline that can be applied at every level. Within contract management, our experience shows that it is indispensable and amplifies what the contract manager can do. Anticipating uncertainty may seem a vague concept, but it remains a high value-added tool for securing contractual projects, making them more efficient, and creating a calmer environment conducive to business.