S1. Risk Management
The aim of this module is to provide the participants with a comprehensive understanding of commercial and financial risk through the procurement cycle so that they can develop effective mitigation techniques.
Who Should Attend
The module is aimed at staff at all levels, including Directors and Senior Managers who have a strategic procurement responsibility. It is applicable to procurement professionals as well as those from a wide range of business disciplines who have a devolved procurement responsibility. Those disciplines include finance, legal, compliance, audit, engineering, design, project management, construction, purchasing, procurement, commercial/contracts and general management. Those who will benefit most will have a current or planned interface with suppliers or customers or other third parties through which contracts are awarded and managed. The module will suit those with little or no previous risk management training but will serve as a refresher for those who have some training but do not practice their skills frequently.
The Teaching Method
The teaching method is based on the Kolb learning cycle and incorporates a balanced mixture of a didactic approach and practical exercises centred on PowerPoint presentations. The structure is consistent with the skills framework for Procurement Project in Local Government in ensuring that Levels 1 and 2 (Understanding & Knowledge) are covered within the programme thus providing a firm base upon which the delegates can build their practical experience to reach Level 3 (Expertise). The module is tutor led throughout using syndicate work, highly interactive plenary discussion groups, easily understood case studies and role playing where appropriate. A formal framework is built around the delegates’ current knowledge and they are encouraged to re-discover and share their knowledge and experiences. The ideal group size is eight to twelve delegates but it is possible to extend the group size to fifteen. Copies of the training material are provided in the form of a workbook. Delegates are encouraged to develop both their short and long term memories to increase the value for money provided for the employer.
The Learning Outcomes
In this highly interactive workshop the delegates will fully examine the definitions of risk, risk impact and differentiate between the mitigation of risk through reducing the probability of occurrence and the mitigation of impact through use of contractual Ts & Cs and financial provisions such as insurance. They will review and consider the need for progressive and repeated risk management methodologies through the whole of the procurement cycle in the context of the nature of contract with which they are involved. A model of risk identification, categorisation and prioritisation will be built so that the delegates have a tool to use when returning to their line function. Then the delegates will build a risk management model that is relevant to their daily duties. Also, the delegates will be introduced to a software programme that is typical of that in use in a variety of market sectors. Building upon earlier core modules they will learn how and when to apply damages clauses as remedies for poor performance or full contractual default. They will address the full gamut of potential damages under English contact law so that they understand the differences between liquidated and unliquidated damages (damages at large). Time will be spent examining why some sellers regard liquidated damages as essential protection and how this will impact on the price for the buyers. Full explanation will be provided on the application of incentives in contracting and the need to avoid penalty clauses which are unlikely to be supported by the courts in the event of litigation to settle disputes.
The four main methods of closing out a contract will be reviewed so that the delegates understand what exit strategies they have at their disposal in order to ensure that these are incorporated within the contract.
The module is scheduled for 1 day.
The topics covered include:
- Risk Management – Definitions
- Risk as a probability
- Risk impact
- Mitigation of risk to reduce probability of occurrence
- Mitigation of impact
- Risk Management Methodologies
- Contract Ts & Cs
- Transference of risk
- Rejection of risk
- Sound management techniques through the procurement cycle
- A Risk Management Process
- Severity analysis
- The Probability Impact Matrix (PIM)
- Action planning
- Implementation, monitoring and the feedback loop.
- The Risk Ranking Matrix.
- probability ratings
- impact ranking
- The Bow Tie model
- The risk event
- The Threats
- Damages as remedies for poor performance
- Liquidated damages – buyers or sellers clause?
- Damages at large – consequential losses
- “Full & Final Settlement”
- impact of insurance and Unfair Contract Terms Act
- Contract Exit Strategies
- Completion of performance