Much confusion often surrounds the task of determining risk
associated with a contract and then tailoring the risk and
liability provisions of the contract to reflect that risk.
As a result, the risk and liability provision in contracts are
often template-based with standard insurance amounts and liability
caps inserted with little consideration. Consequently, the risk and
liability provisions do not always allocate risk appropriately,
which may result in increased and unnecessary costs to both
contracting parties.
The purpose of this article is to help to demystify the risk
assessment process, and provide a brief guide (with a simple
example) on how to translate the outcome of a risk assessment into
a tailored risk and liability regime to address the specific risks
of the transaction.
