Tuesday, January 11, 2011

Risk management in competition

“If the customer is not satisfied, he may not want to pay for our efforts. If he is not successful, he cannot pay. If he is not more successful than he already was, why should he [pay]?”

In a proposal, you must be optimistic and assured; most customers reading your proposal want reliable solutions from a confident supplier.

On the other hand, most risk managers are pessimistic; they expose unreliability in the estimates. There is a natural disconnect here.

If you are proposing sole source, you can spread a risk premium among your work package estimates; if you are bidding competitively, can offer the risk premium as an optional insurance package. The customer may not buy it, but the customer will nonetheless be exposed to your risk assessments and may well give you "points" for foresight.

Either way, it's tricky territory.

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1 comment:

  1. John,

    There is a discussion on some LinkedIn forum about risk managers being pessimistic. My response was, risk managers are "realist." I also remind anyone that will listen of Tim Lister quote - "risk management is how adults mange projects."

    But at the same time there is much confusion around risk, the definition of risk and the "handling" of risk. As you say, it is risk management is tricky business.


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