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Dealing with uncertainty

March 12, 2014

Smart organizations exploit uncertainty to create value. They do this by implementing approaches that allow them to manage uncertainty and – as Ian Heptinstall commented in response to my last blog – this is not achieved simply by shifting risk to the other party.

In last week’s webinar with David Hillson, we discussed the growing challenges of ‘uncertainty’, which result from a variety of factors – volatility, complexity, ambiguity being prime amongst them. David commented that there is a difference between precision and accuracy and that contracts cannot anticipate every eventuality. Therefore in dealing with uncertainty we must think about a range of contract and relationship models.

If substantial change is likely, the contract needs to embed terms that allow active scope management rather than seeking to nail it down and place onerous performance responsibilities onto the supplier.

Selection criteria should be adjusted to reduce the risk of conflict or non-performance. In other words, select a supplier that exhibits the experience, culture and appetite to handle uncertainty. This is unlikely to be the low price bidder, but may well turn out to be the low cost bidder.

A recording of the webinar with Dr David Hillson is available in the IACCM Member Library

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