As CEO Tim Cummins said in his keynote speech on the first day of this year’s IACCM Americas Conference: “The journey for recognition of the contracting function has taken 15 years - most of it wandering through a desert.” Dry (heh) British humor aside, the overall feeling at the event was that contracting as a whole is finally getting the corporate recognition that it deserves, as a “professionalized community that operates with respect in the business world.” Here are some highlights from the sessions I attended on holistic risk management (through contracts, of course!).
First, let’s set the scene. 8 a.m. Marriott Chicago O’Hare. Check. Out. This. Carpet:
Despite a textile pattern that was easily louder than a marching band comprised of seventh graders, attendees slurped gallons of coffee (and more Diet Pepsi than I thought humanly possible) during the morning networking hour before we trod off to my first breakout session, Taking a Holistic Approach to Risk Management.
Truthfully, the session was great. Dierk Schindler, head of EMEA Legal Field Services & WW Contract Management & Services (always appreciate a title with two ampersands), started off by walking through the risk landscape in terms of contracts. Here are some interesting takeaways:
- Contracting and commercial practices are “key weapons” in a world where disruptive technology (SaaS, cloud, automation, etc.) are quickly becoming the norm. Dealing with risk management is competitive advantage/disadvantage. If done well, it can mean increased speed/good outcomes. If done poorly, all hell can break loose.
- Why anticipate failure when you can facilitate success? The traditional negotiation/contract focus is to anticipate failure and plan for that. This mindset leads to shuffling risk back and forth rather than focusing on a solid business outcome, lacks incentives for involved parties to foster information exchange and new idea creation. A small shift in purpose can go a long way.
- According to an IACCM survey, the most commonly negotiated terms in contracts don't always correlate to the terms that rank highest in importance for people. Check this out:
- Analyze the origin of your contract disputes. Too many firms don’t do this. Was there a failure in administration? To understand or comply with obligations? Incomplete design info or employer requirements? Failure to make interim awards of time extension and compensation? Poorly drafted or incomplete and unsubstantiated claims? Don’t let it go! Dig into the how/why, and learn some lessons.
After Dierk’s overview, we dived into some case studies. What were we provided as a tool to help? Why, a spreadsheet of course! Though it would be great for there to be something (Bueller?) that is more sophisticated than the spreadsheet my group never even utilized - what else is there? How else can you effectively weigh various aspects of contract risk, multi-dimensionally, in a way that is easy to understand and easy to present?
The session ended with some ways that contracting departments can improve their function in terms of risk management. Cross-functional coordination was the biggie, of course - how can you get anything done if you can’t talk to procurement, or finance, or even sales? Dierk argued that there is a place for contracts to take a greater role across several business functions. Also, as I already said: change your focus to delivering success rather than avoiding failure.
The downsides? Most companies are weak in the use of economic tools and analysis, corporate compliance and the needs of the market. And despite the advice in the previous paragraph, there is still a huge disconnect between corporate strategy and terms and practices of contracting/relationship management. The suggested solution to that? Branding. Check out my next post for more.