Risk – is your contract set in stone?

Entering into a contract is a bit like the giddy phase of getting cosied up or married — everything appears rosy and full of excited anticipation. But there’s the real risk of things going wrong if the relationship isn’t nurtured or doesn’t produce the results that you expect. Ultimately, if the situation deteriorates — what happens then? Is divorce really your only option?

We are not stuck in the sort of matches created in the 18th century – married off to a suitable family rather than because we are in love. We have a wealth of knowledge at our fingertips (via the internet) and are more informed than ever before. If we are growing ever more circumspect in our love life, why do so many businesses stick their heads proverbially in the sand when it comes to business relationships and risks?

The more you discuss risks with your client, the more you can establish and outline:

  • specific risk factors or events which coudl derail this project,
  • who bears the time and cost consequences should the worst happen, and
  • who should mitigate those consequences (even for events beyond your reasonable control, such as a pandemic).

Risks matter right from day one until the end of your relationship. Think of the risk clauses in your contract as a bit like a pre-nuptial agreement — by thinking about possible future scenarios, you’re preparing the ground in case the worst happens. Risk events can cause massive change to the project and it might be possible to manage and mitigate those risks, or it may be necessary to quit while you can!

‘Get out’ (termination at will) clauses are relatively common in contracts when a business can basically call a halt to the project, possibly because of unforeseen risks but also simply because they have changed their mind. But this is the nuclear option: cancellation clauses attempt to circumvent risk altogether — only for the benefit of one company, and at the expense of the other.

What should you do?

There is no place for get out clauses if there’s trust between the two companies. So why not take a more positive approach?

Your client should include regular check-ins giving your client an opportunity to raise any concerns, howver minor or trifling. You want to positively encourage your client to highlight any concerns immediately. Don’t let issues fester!

This will provide you with the opportunity to put things right in a timely manner. If they harbour doubts, concerns or complaints then however great your project is objectively, your client will – at best – feel bruised and beaten and – at worst – want to walk away from the relationship.

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