# Manufacturing Contract Risk Exposure Assessment > Source: https://netray.co/tools/manufacturing-contract-risk-exposure-assessment > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer Ten questions that score how well your contract practices control liability, IP, flowdown and renewal risk. ## Category compliance-legal ## Audience - Contracts manager - General manager - Quality manager - Finance lead ## Tool **Kind:** assessment **Questions:** #### How are liability caps handled in customer contracts? **Options:** ##### We sign whatever the customer sends, often with no cap **Score:** 0 ##### We negotiate caps on large deals only **Score:** 2 ##### A cap policy exists and exceptions need approval **Score:** 4 #### Do you exclude or limit consequential damages such as line stoppage and lost profit? **Options:** ##### No, or we do not check **Score:** 0 ##### Sometimes, if the customer allows **Score:** 2 ##### Yes, as a standard position with documented fallbacks **Score:** 4 #### Do you know which contracts auto-renew and when notice is due? **Options:** ##### No central list **Score:** 0 ##### A spreadsheet that is updated occasionally **Score:** 2 ##### A maintained register with alerts and owners **Score:** 4 #### How do you manage flowdown clauses from customers to suppliers? **Options:** ##### We do not track them **Score:** 0 ##### We pass them on for key programs **Score:** 2 ##### We map required clauses to every supplier PO and verify them **Score:** 4 #### Who owns tooling, drawings and IP created in a program? **Options:** ##### It is not written down **Score:** 0 ##### It is in some contracts only **Score:** 2 ##### Every program has a written IP and tooling ownership position **Score:** 4 #### How do you handle conflicting terms between POs and acknowledgments? **Options:** ##### We ignore acknowledgment terms **Score:** 0 ##### Buyers read them when time allows **Score:** 2 ##### Acknowledgments are reviewed against standard terms before release **Score:** 4 #### How are warranty and recall exposures tracked? **Options:** ##### Not tracked **Score:** 0 ##### Tracked by the quality team informally **Score:** 2 ##### Warranty terms and reserves are tracked by contract **Score:** 4 #### Do contracts specify governing law and dispute resolution that you have reviewed? **Options:** ##### We accept whatever is offered **Score:** 0 ##### We review for key customers **Score:** 2 ##### We have preferred positions and counsel reviews exceptions **Score:** 4 #### How are export control and sanctions clauses handled? **Options:** ##### They are not reviewed **Score:** 0 ##### Reviewed for defense or aerospace deals **Score:** 2 ##### Screened for every new customer and contract **Score:** 4 #### Can you find a signed contract and its amendments within minutes? **Options:** ##### No, they are in email and folders **Score:** 0 ##### Usually, for current customers **Score:** 2 ##### Yes, from a central repository linked to the ERP record **Score:** 4 **Bands:** #### High exposure **Min:** 0 **Max:** 29 **Verdict:** Contract risk is mostly unmanaged and surprises are likely. **Recommendations:** - Build a list of all active contracts with end dates and notice periods - Set a standard liability cap and consequential damages position - Get counsel to review your top five customer contracts - Name an owner for contract management #### Partly controlled **Min:** 30 **Max:** 59 **Verdict:** You have habits in place, but coverage is uneven. **Recommendations:** - Formalize a clause playbook with fallback positions - Add alerts for notice dates and renewals - Track flowdown clauses by program and supplier - Link contracts to customer and vendor records #### Well managed **Min:** 60 **Max:** 84 **Verdict:** Most major exposures are controlled with some gaps. **Recommendations:** - Audit the exceptions that were approved last year - Test whether flowdowns are reflected on supplier POs - Review IP and tooling positions on older programs - Automate renewal and expiry reporting #### Mature practice **Min:** 85 **Max:** 100 **Verdict:** Contract practices are systematic and measured. **Recommendations:** - Review the playbook annually against lost negotiations - Measure cycle time for contract review - Share lessons learned with sales and purchasing - Keep the repository and ERP links clean ## Content **Intro:** Most contract problems in manufacturing come from habits, not from one bad clause: signing customer paper without a cap, missing a renewal date, or passing a requirement to the wrong supplier. This assessment scores the habits that control that risk. **Sections:** #### How to use the assessment **Body:** Answer based on what happens in practice, not what policy says. If you are not sure, choose the lower score, because uncertainty about contract terms is itself a sign of exposure. Run it with someone from sales, purchasing and finance if you can, and compare answers. Differences between departments often reveal the real gaps. #### What the questions test **Body:** The questions cover five areas: liability limits, renewal control, flowdown discipline, IP and tooling ownership, and retrievability of signed documents. These are chosen because they cause the largest unplanned costs for manufacturers: uncapped claims, silent renewals, passing the wrong terms to suppliers, and disputes over who owns a tool or a design. **Bullets:** - Liability and consequential damages - Renewals and notice dates - Flowdown to suppliers - IP and tooling ownership - Document retrieval #### Reading your score **Body:** A low score means start with a register: you cannot manage what you cannot list. A mid score means build a playbook so positions are consistent. A high score means test the system with an audit of exceptions. The score is a conversation starter and not a legal opinion about any one contract. #### Common mistakes **Body:** Treating contract management as a legal-only job, keeping contracts away from ERP records, and measuring only value rather than risk. Also, many firms review the main customer agreement carefully but ignore purchase order terms, which often govern the actual shipment. **Cta:** If you want a read-only view that links contracts, orders and deadlines in your ERP, Netray can scope that with you and keep a person approving any action. **Faq:** #### Is this a legal audit? **Answer:** No. It is a self-assessment of contract management practices. It does not review any specific contract or give legal advice. Use counsel for contract review. #### What should I fix first if my score is low? **Answer:** Build a register of active contracts with end dates, notice periods, liability caps and owners. That single list prevents many surprises and gives you a base for deciding what to review in detail. #### Does this apply to small manufacturers? **Answer:** Yes. Small firms often have less negotiating power and less legal support, so a simple playbook and a renewal list give a good return. Scale the process to your size, not the other way around. #### How often should I repeat it? **Answer:** Once a year is enough for most teams, or after a major customer win, acquisition or ERP change. Compare scores over time and focus on the questions that moved the least. ## Search terms contract risk assessment manufacturing, supply contract risk score, contract management maturity, unlimited liability contract risk, contract flowdown risk, customer contract risk review, contract compliance self assessment, manufacturer contract practices --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json