Contract Economics - risk allocation and acceptance as a source of value creation and leakage in contracts - IACCM Europe Conference 2019
We all know that capturing and retaining value in contracts can be difficult at the best of times, especially where it is so easy for buyers and suppliers to fall into conflict. However, such conflict is often just a symptom of tension created through an inappropriate risk allocation and transfer through the contract. In this presentation, Walter explores the theory of contractual risk transfer and its impact on supplier behaviours and conflict. We discuss how contractual risk transfer can create or destroy value. Commercially fit for purpose contracts should be based on an optimum risk transfer, but how should this be achieved in practice? We look at options that organisations have in structuring contracts to get better value and outcomes from their suppliers. This presentation draws strongly on case study examples to illustrate the benefits of appropriate commercial risk transfer and how this serves as a foundation for collaboration and building better commercial relationships.