There are many things involved in a project risk policy. One of them is contract management. Various kinds of contract can have an impact on the success of risk management strategies. As shown in the figure 14.1, the buyer and a seller risk is associated with a variety of contract types. For Example fixed price contracts create risk for the seller, while cost reimbursement contract creates risk for the buyers. Time and materials (T&M) Contracts fall in between.
Some of the risks can be tackled when managing contractors who are working on some of the projects. Thus it is vital to choose the right kind of contract type and process to make sure the contractor shares in the risks of completing the work. That the cost of a particular risk is shared which can impact the project. Four basic types of contract types and their implications for risks are as follows: