Managing risk is an integral part of good management. It is a process that is best embedded into existing practices or business processes.

The management of risks should therefore be an integral part of all aspects of procurement, including the development and management of contracts. This requires the identification of risks and, where appropriate, the implementation of risk treatments at key points in the procurement cycle. This in turn involves identifying the stages or events where risks are likely to be the highest and/or the adverse effect of an event or occurrence is likely to be the greatest. Wherever possible, the approach to managing risks for individual contracts should be consistent with the entity's broader risk management framework. Risks to achieving contract objectives must be identified and treatments for addressing them must be developed and implemented. Treatments may be effected through contract provisions and through active management of the contract. A key issue to be considered is the level of risk assumed by each party to a contract. The CPGs present a balanced approach to risk allocation in contracts, noting that, as a general principle, risks should be borne by the party best placed to manage them.12

Further information about risk management is available in the AS/NZS/ISO 31000:2009 standard and supporting guidance issued by Standards Australia.13

Managing risk is an integral part of good management.