Abstract
This paper explores the problems of risk management and all the issues that concern such management, i.e. risk management review, risk and contract management, risk case study, risk management software. There are two questions current article answers. The first question dedicates to the brief discussion of the management risk in professional services contracts. The second one is meant to discuss the management of risk in physical works contracts with detailed observation of NZS3910:2003 Conditions and Contract.
Key words: risk management, risk review, professional services contracts
Risk Management
Nowadays risk is an essential issue that can be seen in all aspects of modern life. Especially, such statement concerns modern enterprises and modern economy. It can be said that the problem of risk and its management has appeared in 1988 when companies and managers had begun to discuss enterprise risk (Hampton, J. J., 2009). As a matter of fact an actual organization of risk management started after 1988 and development of the study had begun. But the earliest author that described and used term “derivative” in a financial contract context was Mark Rubinstein (Dubofsky, D. A., 2003). In the particular article he used this term to refer to options. It can be said that a process of evaluation and managing the risk had begun since that moment.
In order to realize an actual management of risk and all the problems and aspects that concern it, it is necessary to give a definition of risk. This term has a variety of definitions. Most popular and meaningful definitions are: possibility of loss or injury, potential for a negative impact, and likelihood of undesirable event (Hampton, J. J., 2009). The first statement has the most recognizable definition. It says that there is something to lose, and will happen through an accident or misfortune. The second statement is a generic definition. Something (potentially) could go wrong and there is a possibility to lose something. The third one is a statistic analysis of the risk that can be seen on the horizon.
Thus, the last definition that is more general is rapidly becoming the norm for modern businesses and organizations. There is a difference between enterprise risk and the risk in professional services contracts. In fact, enterprise risk has many variations. It varies with the line of business, the nature of its entity, and even political and economic issues. The risk can be aggregated from such components. The first of the risk mentioned before is business risk (Hampton, J. J., 2009). It means that exposures can erupt and such eruption can cause failure of a company. Technology and its development can make current activities of a company obsolete. This may cause changing of potential customers preferences. It is realized that some risks are serious and some are not. A catastrophic damage involves the destructions of a majority of assets (such as funds, stocks). This damage produces bankruptcy (whether a near-term or immediate) of the enterprise (Hampton, J. J., 2009).
In order to discuss risk management in physical work contract and in …