By Helena Haapio
Savvy managers now not examine contracting tactics and files reactively yet use them proactively to arrive their company targets and reduce their dangers. To be triumphant, those managers desire a framework and a brief consultant to agreement danger offers this. the basis of deciding upon and handling agreement danger is what the authors name agreement Literacy: a collection of talents suitable for all who take care of contracts of their daily enterprise atmosphere, starting from common managers and CEOs to revenues, procurement and undertaking execs and hazard managers. Contracts play an incredible function in company luck. Contracts govern businesses' bargains and relationships with their providers and clients. They influence destiny rights, funds flows, expenses, profits, and hazards. A company's agreement portfolio should be topic to larger losses than someone realizes. nonetheless the best danger in enterprise isn't taking any dangers. built with the ideas defined during this publication, enterprise and danger managers can begin to see contracts another way and to take advantage of them to discover and accomplish the precise stability for enterprise luck and challenge prevention. What makes this brief advisor from the authors of the acclaimed Proactive legislation for Managers in particular worthy, if now not detailed, is its down-to-earth managerial/legal technique. utilizing lean contracting, visualization and the instruments brought during this publication, managers and legal professionals can in achieving legally sound contracts that functionality as managerial instruments for good thought-out, life like danger allocation in enterprise offers and relationships
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Extra info for A short guide to contract risk
If we define risk in terms of uncertainty related to reaching objectives or as a possible negative deviation from the expected, what, then, are the objectives that may be at risk in the context of contracts? The answer will depend on the context—for example, whether we are discussing a company, a business unit, or a project— and on whom we ask. An entrepreneur might say that business results are at risk: contracts are made to accomplish business results. An accountant might say that cash flow and assets are at risk: contracts are made so that money, products and services can predictably change hands and reliable accounts can be kept on who owns what and who owes what to whom.
Contract opportunity can also mean “upside risk” in the content of contracts: events that could affect contractual objectives beneficially, or the possibility that a contract will lead to a positive deviation from the expected outcomes. Again, these outcomes may be business outcomes or legal outcomes. 22 Contracts and Risk—the Big Picture 2 When used proactively, contracts can help remove uncertainty and provide predictability. This opportunity offered by contracts can be used to remove uncertainty related to performance and the parties’ roles, rights, and duties.
The company is not always aware of the contracts made in the different business units and whether the units’ contract processes and documents are up to date. Information about aggregate liabilities or risks might not be available quickly. Purchasing power is hard to leverage if the units do not know that they are using common suppliers or the value of their total purchases. On the sell-side, payment terms, warranty periods, liabilities and other terms may vary significantly between the different business units and also between the different product and service groups within one unit.