Use the value/risk matrix
The value/risk matrix (VRM) is a tool that considers value and risk to help you determine the level of complexity associated with:
- a contract or group of contracts (helps with contract management)
- the sourcing of specific goods/services (helps with developing a sourcing strategy)
- a category of goods or services (helps with developing category management plans).
The level of complexity is assessed as either:
- routine—low value, low risk
- leveraged—high value, low risk
- focused—low value, high risk
- strategic—high value, high risk.
Apply the VRM to contract management
The way you manage contracts will vary depending on their value, risk and complexity.
You should classify a contract as routine, leveraged, focused or strategic with the VRM to:
- help define the right approach to effectively manage a contract
- inform the activities and focus required to manage performance and achieve value for money
- help ensure that people with the right capability and experience are appointed to manage and administer contracts and suppliers.
Apply the VRM to sourcing
The VRM can guide your decision-making throughout the sourcing process, including:
- sourcing strategy
- contract type
- contract requirements (such as performance measures and reporting requirements)
- contract development
- contract management approach
- resource allocation
- approval processes.
Apply the VRM to category management plans
You should start your category management planning by assessing the goods or services category to determine its value/risk classification.
You can then develop your category management plan to make sure effort is focused on the right activities, for example:
- defining risk management strategies
- defining supplier and performance management strategies
- identifying strategic initiatives, partnerships and suppliers
- recommending sourcing strategies
- identifying resourcing requirements.
For queries about category management, email email@example.com.
For matters relating to sourcing and contract management, contact your agency procurement lead or visit your agency intranet.