Risk Management

Risk Management is 10% of the exam and rests on one allocation principle: assign each risk to the party best able to manage it. Contracts that dump uncontrollable risks — design errors, unforeseeable conditions — onto the contractor breed claims and premiums instead of protection.

The response vocabulary is avoid, transfer, mitigate, accept. Avoidance eliminates the risk at its source by changing the plan; transfer moves it via insurance and bonds; mitigation reduces probability or impact; acceptance keeps it, usually with contingency behind it. Qualitative analysis ranks probability × impact on a matrix; quantitative analysis prices it — expected monetary value is probability times impact, and Monte Carlo simulation puts confidence levels on completion dates.

Insurance questions favor two instruments: professional liability (E&O) covering negligent professional services, and OCIP wrap-ups where the owner buys one program covering everyone on site. Dispute-avoidance content overlaps contract administration: ADR spans mediation, arbitration, dispute review boards, and mini-trials — liquidated damages is a contract remedy, not ADR.