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Contract Management: Bridging Buying-Selling Risks
Arjen van Berkum |
January 8, 2024 |

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Eight ways to improve legal and compliance risk management

#contractmanagement is not #sales and it is not #procurement. It is part of both.

When it comes to buy and sell risks, organizations need to consider them from a single perspective in order to effectively manage and mitigate potential negative impacts. Here’s an explanation:

1. Understanding the Context

Organizations should have a clear understanding of their specific industry, market dynamics, and the overall economic environment. This allows them to assess the risks associated with buying and selling goods or services within that context.

2. Identifying Potential Risks:

Once the context is established, organizations can identify and assess the specific risks associated with their buying and selling activities. For buying, this may include risks such as supplier reliability, quality issues, price volatility, and supply chain disruptions. Selling risks may involve pricing challenges, customer demand fluctuations, credit risks, and market competition.

3. Risk Management Strategies:

Organizations should develop strategies to manage and mitigate buy and sell risks. This involves implementing various risk management practices, such as conducting thorough due diligence on suppliers and customers, negotiating favorable contracts, diversifying supply sources and customer bases, maintaining effective communication channels, and establishing contingency plans for unforeseen events.

4. Monitoring and Evaluation:

It is important for organizations to continuously monitor and evaluate the effectiveness of their risk management strategies. Regular assessment helps identify any emerging risks, evaluate the impact of existing strategies, and make necessary adjustments to ensure ongoing resilience in the face of changing market conditions.

5. Integration and Collaboration:

Buy and sell risks are interconnected and should be seen holistically within an organization. It is crucial for different departments, such as procurement, sales, finance, and risk management, to collaborate and align their efforts to minimize overall organizational risk exposure.

By considering buy and sell risks from a single perspective, organizations can develop a comprehensive risk management framework that enables them to make informed decisions, maintain smooth operations, and protect their financial well-being. As this is not a pure risk function it is something that should be governed by the business. Therefore my everlasting argument to put contractmanagement in the business from an accountability perspective, and then choose your optimal organizational alignment. Don’t fall in the mintzberg trap and make staff departments leading departments.

Author: Ajren van Berkum

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