Risk Score Aggregation

Individual contract risk scores tell you the risk of each engagement. Aggregated scores tell you the risk of your business. Total contractual exposure across all active contracts is the number that determines your insurance requirements, your reserve allocations, and your risk tolerance for new engagements. Aggregation is not a sum — it is a portfolio analysis that accounts for correlated risk, diversification, and concentration.

1. Total Exposure Calculation For each contract, calculate the maximum potential liability using the risk scoring model. Sum across all contracts to produce total exposure. This is the worst-case number — every provision triggered, every obligation activated, every cap reached. The total exposure justifies the risk management investment.
2. Concentration Analysis Is your exposure concentrated in a single client, a single provision type, or a single risk category? If 60% of your total exposure comes from indemnification provisions, your portfolio has concentration risk — a court decision that changes indemnification interpretation affects 60% of your total exposure. Diversified risk is safer than concentrated risk at the same total level.
3. Correlated Risk Identification Do multiple contracts share the same triggering condition? If five contracts include data breach indemnification, a single data breach triggers five obligations simultaneously. Correlated risk means the worst-case scenario is not one provision triggered — it is five provisions triggered by the same event. The aggregate exposure for correlated risks is the sum, not the average.