Risk Management

Risk management

Risk management is the process of:
  • identifying risks;
  • analysing their consequences; and
  • where necessary, devising appropriate strategies to minimise the likelihood of them occurring or to mitigate their impact if they do.

It is undertaken to provide greater certainty that the planned procurement will have successful outcomes.

Risk management should commence early in the procurement process and is re-visited throughout the process to ensure that any new risks are identified and previously identified risks are monitored. Risk management is especially important for high-risk procurement, for example, building and construction projects and IT purchases.

How do I identify, assess and manage risks?

The amount of effort you expend on risk management depends on the nature, cost, complexity and significance of the procurement.

In brief, risk management involves the following actions:




Establish the context - you need to be familiar with the nature and scope of the procurement, including any external factors that may impact upon it.


Identify the risks - involve users and other stakeholders. The checklist of potential risks in the procurement process identifies potential procurement-related risks when purchasing goods and services, likely consequences, and appropriate mitigating actions.


Analyse and evaluate the risks - in terms of likelihood and seriousness. Risks are then graded to determine their significance and to identify those that need to be managed.


Manage the risks - significant risks can be managed by either implementing preventative actions or by developing contingency plans. These are documented in the Risk Register and include information on:

  • what action is to be taken;
  • who by; and
  • when.


Monitor and review the risks - throughout the project. Some new risks may be identified, and some risks may be downgraded or upgraded depending on the progress of the procurement and other circumstances.


Communicate and consult - keep users and other stakeholders informed throughout the procurement process.

What resources are available

The Project Management guidance information published by the Department of Premier and Cabinet provide detailed guidance on developing a Risk Management Plan and Risk Register. A Risk Register alone may be sufficient for smaller projects.

The Tasmanian Risk Management Fund website also provides information on risk management strategies, as well as risk management guidelines for government agencies and determining appropriate levels of insurance.

Risk management guidelines for building and construction projects are provided in the Procurement Practices Manual - Contract Documentation, Delegation and Risk.

Professional Standards Act 2005

The Professional Standards Act 2005 provides for the limitation of civil liability of members of occupational associations in certain circumstances.

Under the Act, professional associations (eg Engineers Australia, Institute of Chartered Accountants) may apply to have a professional standards scheme approved by the Professional Standards Council. Schemes provide for certain occupational standards, risk management strategies and insurance and/or asset levels to be adhered to and also limit the legal liability of a member of the association to which the scheme applies to a specified amount. That amount must be higher than $500 000. If the Council approves the scheme, the scheme is submitted to the Minister who may approve the gazettal of the Scheme.

The Professional Standards legislation does not apply to damages for personal injury or death, or to cases of fraud, dishonesty or breach of trust.

Practical Matters

Once an association has had a scheme approved by the Professional Standards Council, the cap imposed by that scheme applies to all future contracts into which a member of the association enters unless the scheme allows for a higher level of liability to apply.

The cap imposed by such a scheme not only applies to all contracts entered into after the scheme is approved but will also retrospectively apply to contracts entered into after 1 August 2005 (when the Act was passed). For example, an agency can enter into a contract with a provider today where no scheme exists. If the provider is a member of an organisation that has a scheme approved, in the future, the liability cap applies to the existing contract regardless of what was agreed to in the formal agreement contract.

A corollary to this is that an agency may enter into a contract with a member of an association with an approved scheme and be happy with the liability cap at this stage but find that the liability cap is varied at a later date by an amendment to the scheme and they are tied to that varied cap without any recourse.

A professional who is subject to a scheme is obliged to have a statement on all official correspondence to the effect that liability is limited, but it is not obliged under the Act to specifically notify existing clients that a scheme has been approved which retrospectively alters existing contracts, nor to notify a prospective client that a scheme may apply to a contract in the future.

The legislation provides that schemes may confer a discretionary authority on associations to approve an increase in the cap.

The Department of Justice is the agency responsible for the Professional Standards legislation and the responsible Minister is the Minister for Corrections and Consumer Protection. 

Current pro-forma documentation

For goods and services, the template Crown Solicitor pro-forma RFT documentation:

  •  includes a waiver clause relating to the impact of future schemes not in place at the time that the contract is entered into; and
  •  for circumstances where a scheme applies:
    • indicates that liability will be limited in accordance with and subject to any applicable schemes; and
    • provides for a higher liability limit to be applied, where the scheme allows for this to occur and where it is required by the agency.

The pro-forma RFQ and Contract for Services documentation includes a clause waiving a supplier's rights in respect of future schemes.

For further information on the RFT documentation and contracts, agencies should contact the Office of the Crown Solicitor.

For further information regarding the administration of the Act, including whether there are currently any schemes affecting Tasmania, contact The Office of Legislation Development and Review on (03) 6165 4930.

The Professional Standards Council website provides information on the national Professional Standards regime.