Key Contract Risk
This is the risk of losses arising from the expiry, cancellation, non renewal or material variation of a key sales/revenue contract of the firm or organization. This risk may be due to one or more of the following:
- The customer choosing to change to another party (competitor) for reasons either within or outside the organization’s control;
- A change in the customer’s business (such as closure of a line of business).
Whilst the impact of the loss will usually be financial and is a specific category of Revenue Risk, the materiality of the key contract makes it a Strategic Risk.