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BAE Systems plc
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=== Contract risk, execution and supply chain risks === These risks affect strategies 1,2,4,5 * There is a risk associated with the costs of fixed-price contracts exceeding the contract amount, and hence resulting in a local loss. The price is agreed based on a projection of the inflation rate, and hence is subject to fluctuation. It is important for BAE systems to maintain tight tolerances on quality, time and cost, in a reliable, predictable and repeatable manner. They have also limited fixed-price contracts regarding design and development, which tend to have more associated risk. * Like any business associated with product manufacturing. BAE system relies on its supply chain, which has intrinsic risk. There are lead-time and availability issues, as well as pricing pressures from inflationary increases in labour, energy and key materials.
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