IT Contracts – Risk Management

Edmund ProbertMarlene Naumann21 March 2006

Outline

• Contract and Risk• Accepting the Risks• Mitigation of Risk

1. Contract Specifications2. Apportioning Risk3. Contract Management

• General Issues• Conclusion

Contracts and Risks

•IT Contracts• IT Supply/Integration Agreement• Outsourcing Agreements• Software Development Agreements• Support and Maintenance Agreements• Software Licences

Contracts and Risks

• Principal RisksUncertain obligationsNon-PerformanceNo Useful RemedyUnlimited Liability

Accepting the Risk

• Due Diligence• Credit Score• Other suppliers’ experiences• Accounts

Contract Specifications

• Specification•User’s •Suppliers •Change

• Timetable

Apportioning Risk

• Acceptance Testing• By the User or Supplier• Procedure – who writes the test criteria?• Mechanisms to Remedy

Apportioning Risk

• Warranties/Indemnity• An assurance or promise• Breach = Damages• Indemnity

Apportioning Risk

• Limitation of Liability• Death, personal injury, fraud• Exclusion of types of Liability• Capping Liability

• Insurance

Contract Management

• Variation• Facilitates a working relationship• Avoids frustration and termination• Regular reviews

• Project Manager• Regular meetings

Contract Management

• Dispute Resolution• Senior staff / Mediation / Arbitration

• Exit Plan• Assistance with data migration• Additional payments• Intellectual Property Rights• Competitor

• Good Housekeeping

Other Issues

• Confidentiality

• Intellectual Property Rights• Existing rights• New Rights

Conclusions

• Risk v. Rewards

• Minimise

• Insure

QUESTIONS?