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THE CONTRACT RISK AND OPPORTUNITY MANAGEMENT PLAN

With all these processes and principles, it is easy to feel overwhelmed. How can you implement systematic contract risk management? How can you start using your contracting processes and documents systematically and proactively to (1) decrease the possibility and impact of failure and negative events, (2) increase the possibility and impact of business success and positive events, and (3) enable sound risk taking, which includes balancing risk with reward? To do so, you need a plan. this is what the Contract Risk and Opportunity Management Plan is designed to accomplish.

WHY DO YOU NEED A PLAN?

Many professionals already use contracts for risk management purposes and possess considerable skills at doing so. Most do it intuitively, as part of good business practice, good project management, or good lawyering. But in today's business, individual skills are not always sufficient to manage an organization's contract risks and opportunities. Contract risk identification should be undertaken by the relevant members of the business or project team, not just by the "experts.” It should be undertaken in the context of the other issues and risks facing the team, whose members (rather than the "experts”) will be in charge of managing the risks during contract implementation. To support seamless risk recognition, review, and response, it is useful to have a plan in place. Every plan does not have to be great or flawless; even an imperfect plan can be better than nothing.

Albert Szent-Gyorti, Nobel Laureate in medicine, tells the story of a military reconnaissance team that was lost in the Swiss Alps following a snowstorm. The soldiers had given up hope of returning to their main unit alive when one of them discovered a map in their equipment. Having the map calmed the soldiers and, with the sense of direction provided by the map, they found their main unit. Upon their return, they showed the map to their lieutenant, who discovered that it was a map of the Pyrenees, rather than the Alps.11

This story illustrates that a leader does not need a perfect plan to calm employees and get them moving in the right direction. Simply having a plan is often enough to inspire action that can lead to positive results. As noted by Karl Weick, a faculty [1]

member at the Ross School of Business at the University of Michigan and one of the world's leading organizational theorists:

Followers are often lost and even the leader is not sure where to go. All the leaders know is that the plan or the map they have in front of them is not sufficient to get them out. What the leader has to do, when faced with this situation, is instill some confidence in people, get them moving in some general direction, and be sure they look closely at cues created by their actions so that they learn where they were and get some better idea of where they are and where they want to be.[2]

  • [1] Weick, K.E. (1995) Sensemaking in Organizations. Foundations for OrganizationalScience. Thousand Oaks, CA: Sage, pp. 54-5.
  • [2] Weick 1995, p. 55.
 
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