Consequences of Poor Risk Management

Failure to identify and properly manage risk can have a serious impact on the procurement and contract management functions.  Some of the possible consequences of inadequate risk management include:

  • failure of a contract to meet its objectives;
  • unfavourable publicity;
  • client/end user dissatisfaction;
  • complaints from the contractor;
  • a threat to physical safety of staff or clients;
  • failure of equipment/services and the related disruption to an organisation’s operations;
  • breach of legal or contractual responsibilities leading to legal action;
  • opportunities for fraud against the Australian Government;
  • deficiencies in financial controls and reporting;
  • increased audit scrutiny and potentially negative audit findings;
  • a perception on the part of executives that they need to take a close interest in certain procurement and contract management activities;
  • inefficient use of resources;
  • lack of project/contract control and audit trail;
  • delivery slippages;
  • costly schedule recovery exercises;
  • cost overrun;
  • inability to track sub-plans or individual activities, and therefore uncertainty about making payment;
  • costly rework of deliverables or requirements during the contract; and
  • poor relationships and communication with the contractor.
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