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Risk Management in Contracts

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What are the different types of contracts and how do they impact risk?

There are four contracts below and I need to know how they impact risk.
- Firm price
- Fixed price:
- Incentive fee
- Cost plus.

What contract types puts more risk on the buyer? What contract type puts more risk on the seller?

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Solution Summary

Discusses different types of contracts and their impact on risk.

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Firm or fixed price contract puts majority of the risks on the seller as the price is not subject to any adjustment and seller bears the full responsibility for the cost.

Cost plus Incentive Fee: In this type, seller has an incentive to control the cost of ...

Solution provided by:
Sandeep Bardia, MBA
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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