Magazine article Risk Management

36th Annual RIMS Western Regional Conference: Contractual Risks and TQM

Magazine article Risk Management

36th Annual RIMS Western Regional Conference: Contractual Risks and TQM

Article excerpt

Risk managers who possess the technical and legal knowledge required to handle business agreements and contracts can provide a tremendous service to their companies, says Scott Lange, risk manager for Microsoft Corporation. "Many risk managers say that they aren't given the opportunity to play a role in managing their companies' contracts, and often don't see the contracts until after they're signed," says Mr. Lange. "However, risk managers must learn how to become credible players in this process so they can help their companies manage their contractual risks."

To accomplish this objective, risk managers must assimilate the necessary information. "It's imperative that the risk manager gain the skill and knowledge necessary to establish credibility with their own lawyers and people on the outside," states Mr. Lange. "Critical areas in establishing this credibility are legal knowledge, a good sense for the business transactions involved, and strong command of the technical aspects of risk transfer clauses and associated insurance coverages."

Risk managers who wish to get involved in this process must also help their companies establish an effective contractual risk management strategy. "Risk managers should strive to develop a philosophy that is based on finding a fair and reasonable allocation of risk between both parties," he says. "Such an approach limits your risks to the ones you actually have some control over," he says. "This approach also makes it easier to negotiate, because striving for a fair and reasonable allocation enables you to be consistent in your philosophy, whether you are on the giving or receiving end of risk transfer. …

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