How do you incorporate risk and contingency factors in your tender costing?

- Analyze the scope of work to identify potential risk factors. This includes researching the area of work, understanding the customer, and understanding the competitive landscape. - Identify potential external factors that could affect the tender process. These could include changes in market conditions, changes in customer requirements, changes in regulations, and changes in competitors’ strategies. - Estimate the cost of the project and identify the resources required to complete the project. - Develop a list of potential contingency plans that could reduce the risk of the project not being completed on time or on budget.

Once the risks have been identified, it's crucial to delve deeper and understand their root causes. This is pivotal because understanding the 'why' behind each risk can provide insights into potential mitigation strategies. For instance, if there's a risk of a supply chain disruption, is it due to geopolitical tensions, supplier insolvency, or potential natural disasters? After pinpointing the risks and their causes, assess the potential impact and likelihood of each risk materializing. This evaluation will help you prioritize the risks. Use a consistent scale for all risks – for example, from 'very low' to 'very high'. It's also valuable to quantify the potential financial, operational, or reputational impact wherever possible.

1. Identify potential risks. 2. Estimate their impact on cost. 3. Allocate a contingency budget. 4. Regularly review and adjust as needed.

A more advanced technique for risk quantification is using loss scenario simulations. These simulations are designed to envision various scenarios where identified risks may lead to losses, be it financial, reputational, or operational. By simulating these scenarios, you can determine the potential breadth and depth of an impact. When assessing the impacts, it's essential not just to rely on qualitative descriptions but to also put numerical values on potential damages. Impact quantification involves assigning monetary values or other measurable units to the potential outcomes of each risk. For instance, if there's a risk of project delay due to a particular reason, you'd estimate the cost associated with that delay per day.

In the realm of cybersecurity, incidents involving third-party entities can pose significant risks. To mitigate potential damages and ensure clear responsibilities, it's crucial to incorporate specific contractual clauses addressing such scenarios. These clauses delineate the roles and obligations of each party in the event of a security breach. Furthermore, to ensure a swift and effective response to any incidents, organizations should also have in place detailed incident response playbooks. These playbooks provide structured protocols for addressing and managing breaches, especially when third-party involvement is present.

When pricing the risks in tender costing, there are several factors to consider. First, you need to consider the magnitude of the risk, which means the amount of money or resources that could be lost if the risk is realized. Second, you need to consider the likelihood of the risk occurring, which means the probability that the risk will actually materialize. Third, you need to consider the cost of mitigating or managing the risk, which includes the costs of any insurance policies, additional personnel or resources, or other steps taken to reduce the risk. Finally, you need to consider the cost of not mitigating the risk, which includes the potential financial losses if the risk is realized.

- Identify all the risks first and allocate them to their type either technical or commercial/contractual risks. - To do the above, you have to carefully look at the T&C's if provided by customer for any risks you see, learn from previous projects dealing with this customer or EPC contractor if for example any issues with their schedule, excessive documentation requirements, etc.. Also some risks you know internally like long lead times of your company products, etc.. - Estimate the risks mitigation costs for these risks and put your contingency plan.