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Risk management refers to the processes of identifying, analysing and evaluating risks. Risk management plays a role in every stage of the procurement lifecycle and should be considered in all government buying from ‘every day’, low value purchases to high value, strategic contracts and projects. 

Risk management is an ongoing process. Risk should be considered as early as possible during the procurement planning stage and revisited during the contract development stage and the contract management stage. Or in the case of a project, risk should be considered throughout the project lifecycle. 

Risks in the procurement context are found in at least two different places. There is risk related to the contract and contract deliverables (i.e. goods, services or works), but also, risk related to the procurement process itself. When thinking about risks in a procurement context it is important that you think of both of these areas. 

Refer to the Risk Management in the Procurement Context Guideline for an overview of key terminology and concepts relevant to managing risk in the procurement context. 

State agencies should choose a risk assessment tool that is suitable for the procurement, by reference to factors such as the value, complexity and type of procurement. 

There are many available risk assessment tools. Some examples include: 

• templates in the Risk Workbook; 
• running a risk workshop; and 
• the State agency's internal risk management process and tools. 

Insurance is a common risk management strategy used in government contracting, and forms one aspect of an overall risk strategy.  

Most risks that may adversely impact the State will be insurable, such as injuries caused to someone visiting a supplier’s premises as a result of the premises being unsafe. However, some risks are not insurable, such as reputational risks. These risks should be managed through active contract management, including reporting against key performance indicators. 

Refer to the Procurement Insurance Requirements Guideline for an overview of insurance requirements in the procurement context. 

Foreign exchange risk (also known as currency risk or exchange rate risk) arises where an organisation has agreements or arrangements denominated in, or conditional on, foreign currency prices. The value of the currency payments or receipts is dependent on continuous fluctuations in Australian dollar (AUD) exchange rates with those denominated currencies. Any adverse movements in exchange rates, if unmanaged, could lead to significant cash outflows and/or financial obligations, and potentially result in adverse impacts on expense limits, financial performance and expected outcomes. 

Refer to the Foreign Exchange Risk Management Guideline for an overview of concepts relevant to managing foreign exchange risk in the procurement context.