Which approach aids in minimizing the impact of contract risks?

Regular performance monitoring and communication is a critical approach for minimizing the impact of contract risks. By consistently assessing the contractor's progress and engaging in open dialogue, parties can identify potential issues before they escalate. This proactive strategy allows for timely adjustments and problem-solving, fostering a collaborative environment where both sides can address concerns directly.

Moreover, regular monitoring can provide valuable insights into performance trends, allowing for data-driven decisions that enhance contract compliance and effectiveness. It also builds trust between the parties, which can facilitate smoother negotiations and resolutions in the face of disputes or unforeseen challenges.

In contrast, the other approaches do not effectively mitigate contract risks. Not sharing information can lead to misunderstandings and a lack of awareness about potential risks. Extending the contract duration does not inherently address risk factors and may even complicate oversight. Lowering financial penalties might seem appealing but could undermine the motivation for compliance and accountability, thereby increasing the likelihood of contract breaches.