Contract Risk Management — Quick Introduction
The Contract Risk Management Guidance outlines best practices for identifying, evaluating, and mitigating risks associated with contracts across Minnesota State institutions. Developed from training by the Director of Risk Management, it provides standards for insurance coverage, loss prevention, and contract language to help protect institutional operations and reputation.
Key Concepts
- Risk Management: The process of identifying, analyzing, and reducing exposure to potential losses.
- Common Myths:
- “There is no risk” — All activities carry some degree of risk.
- “Insurance is only for the institution” — It protects both parties.
- “No campus presence means no risk” — Risks can also be financial, reputational, or off-site.
Required Insurance Coverages
- General Liability: $2 million per occurrence / $2 million aggregate
- Workers’ Compensation: Required for on-site vendors
- Professional Liability: $2 million per claim / $2 million aggregate
- Umbrella Liability: $1 million minimum recommended
- Network Security & Privacy: $2 million per event / $2 million aggregate
Certificates of Insurance (COI)
- Confirm coverage limits, effective dates, and “additional insured” status.
- Ensure waiver of subrogation is included to prevent vendor insurers from recovering claim costs.
Risk Management Process
- Identify Loss Exposures: Determine scope and parties affected.
- Analyze Risk: Assess likelihood and severity of loss.
- Evaluate Techniques: Avoid, reduce, retain, or transfer risk through insurance or contracts.
- Implement Controls: Use indemnity clauses, insurance requirements, or liability waivers as appropriate.
Contract Drafting Considerations
- Clarify Parties: Define responsibilities and liabilities clearly.
- Specify Details: Avoid vague terms like “reasonable” — use measurable standards or figures.
- Low-Risk Examples: Lecturers, speakers, or recyclers (absent environmental exposure).
Frequently Asked Questions
- Budgeting for Risk: Plan for an estimated 6–8% increase annually based on prior contract exposure.
- No-Cost Contracts: Still require execution if risk exists.
- Cyber Insurance: The system does not currently maintain a centralized policy; campuses may explore local options.
Contacts
- Keswic Joiner, Director of Risk Management — keswic.joiner@minnstate.edu
- Phone: 651-583-8225
- For legal questions, consult the Office of General Counsel.
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