Any supplier of a product or service will typically be tied into a complex array of contracts, committing to a variety of service level agreements with a diverse range of clients.

However, the process with which contracts are agreed, and their subsequent terms, can expose suppliers to a number of unprotected liabilities. Such risks end up costing millions of euros in unbudgeted capital every year for firms.

Critical questions you need to consider

• Do you ensure that the risk assumed via your contracts is commensurate with your overall tolerance for risk, especially if buyers are able to negotiate contracts on their terms?
• Have you analysed the key risks that might threaten the provision of your services as promised in your contracts?
• Do you have the right risk management procedures in place to deal with failure of service, such as business continuity planning?
• Have you checked that your insurance policy can cover your contractual liabilities?
• Are you aware of alternative risk transfer solutions that can help manage contractual risks?