Commercial risk management

Course Overview

Economic survival in an increasingly competitive business world requires that tomorrow's successful business leaders are equipped with a broad range of commercial tools, techniques and processes. It is not sufficient to be competent at finance or business strategy or marketing or contractual matters. The ability to use these tools readily and repeatedly is a core business competence that can be summed up as 'commercial acumen'. We must be able to gain viable business by understanding and managing commercial risk so that we can deploy these other skills in a strategic, co-ordinated manner to help us to protect margins on contracts/projects, deliver good cash flow and reduce the commercial exposure of the business whilst remaining competitive.

During this programme we will define commercial risk, investigate tools and processes to identify, categorise, quantify and manage risk thereby reducing commercial exposure, improve contract/project margins & cash flow and reduce the commercial exposure of the business whilst remaining competitive in the market.

Audience

This seminar is aimed at staff at all levels, including Directors and Senior Managers. It is applicable to staff from a wide range of business disciplines including engineering, design, project management, production, finance, sales and marketing, business development, purchasing, procurement, commercial and general management. Those who will benefit most will have a current or planned transactional interface with suppliers or customers through which there is a need to manage risk throughout the whole of the contracting cycle.

Skills Gained

This seminar will provide a comprehensive commercial approach to handling commercial risk. It will help you to:

• Define risk and risk impact in a structured way
• Identify specific sources of commercial risk in your business
• Categorise and prioritise risk
• Provide methodologies for reducing the probability of occurrence of risk
• Provide methodologies for reducing the impact of risk
• Understand the need for progressive and repeatable risk management
• Understand commercial risk through the procurement cycle so that you can develop effective mitigation techniques
• Enhance your ability to make sound commercial business decisions

Course Outline

Why should we manage commercial risk?

• What is risk? – a definition
• Risk as a probability
• Risk impact
• Mitigation of risk to reduce probability of occurrence
• Mitigation of impact
• Sources of risk to the contract/project
• What are the potential benefits of risk management?
• Who is responsible for risk management?

Risk management methodologies

• Contract terms and conditions
• Transference of risk
• Rejection of risk
• Sound management techniques through the procurement cycle
• Risk management and competitive status

A risk management process

• Identification
• Severity analysis
• Action planning
• Implementation, monitoring and the feedback loop

The risk ranking matrix

• Probability ratings
• Impact ranking

Incentives for good performance

Commercial risk and English contract law

• The Law
• Jurisdiction and enforcement
• The legal view of the contract
• The language of the contract
• Rights and obligations
• Implied and express terms and risks
• Traps for the unwary – best endeavours, time of the essence, fit for purpose

The competitive tendering scenario

• Risk and the bid decision
• Risk and the tender vet
• Ownership of risk

Risk and the contract

• Pricing and risk strategies
• Risk apportionment
• Gain/share arrangements
• Inflation risk
• Currency exchange risk
• Political risk
• Overseas contracting risk
• Delivery, title transfer and risk transfer
• Milestone payments and acquisition of title
• Product liability
• Loss and injury

Business development and risk

• Product life cycles
• Technology life cycles
• Entering new markets
• Crossing the chasm from development to production

Intellectual property rights

• Forms of IPR and protection
• Patents, copyright, design and trademarks
• IPR ownership, assignment and transfer
• IPR infringement
• Contractual indemnities

Contract exit strategies

• Completion through full performance
• Convenience
• Agreement
• Frustration
• Breach

Damages as remedies for poor performance

• Liquidated damages – buyers or sellers clause?
• Damages at large; general damages – consequential losses
• Duty of care
• ‘Full & Final Settlement’
• Impact of insurance and Unfair Contract Terms Act

Contract variations and claims

• Change management process
• Variations and amendments
• Claims and disputed claims

Contractual disputes

• Dispute escalation
• Alternative dispute resolution
• Financial and commercial risks and impact of disputes
• Relationship risks