Risk management in procurement

Risk is defined as a measure of the likelihood and consequence of an occurrence.

Risk management is defined as the systematic application of management policies, procedures and practices to the tasks of establishing the context of risk, identifying, analysing, evaluation, treating, monitoring and communicating risk. The extent of risk management undertaken should be appropriate to the size and complexity of the project. The five questions in determining risk are:

1. Is the supply market competitive and has it the capacity to meet the requirements of demand?
2. Can the public authority readily continue to function (meet all key customer needs) if
supply is interrupted?
3. Is there a low probability that the goods/services will be superseded or become obsolete
during the life of the contract?
4. Is provision and ongoing use of the good/service considered to be highly safe and will it
involve low environmental impact?
5. Is stakeholder and public interest in the purchase low?

If the answer to any of the above questions is NO, the procurement may be considered to be high risk. However, further assessment of the risks involved in the procurement should be undertaken before classifying the procurement as high risk.

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