Playbook: Difference between revisions

A comprehensive set of guidelines, policies, rules and fall-backs for the [[legal]] and [[credit]] terms of a {{t|contract}} that you can hand to the itinerant [[school-leaver from Bucharest]] to whom you have off-shored your [[master agreement]] {{t|negotiation}}s. She will need it because, being an itinerant school-leaver from Bucharest, she won’t have the first clue about the [[Subject matter expert|ISDA]] [[negotiation]]s, and will need to consult it to decide what do to should her counterparty object, as it certainly will, to any of the preposterous terms her [[risk controller|risk]] team has insisted go in the first draft of the {{t|contract}}.

Playbooks derive from a couple of mistaken beliefs: One, that a valuable business can be “solved” and run as an [[algorithm]], not a [[heuristic]];<ref>This is a bad idea. See {{author|Roger Martin}}’s {{br|The Design of Business: Why Design Thinking is the Next Competitive Advantage}}.</ref> and two, that, having been solved, it is a sensible allocation of resources to have a cheap, uninformed human being run that process rather than a machine — which is in turn also a bad idea, just a less bad one than using a human.<ref>Assumption two in fact falsifies assumption one. If it really is mechanistic, there is no reason to have a costly, capricious human “helping to manage” — i.e., ''interfering in'' the process.</ref>

In {{author|Thomas Kuhn}}’s argot<ref>{{br|The Structure of Scientific Revolutions}}. Brilliant book. Read it. </ref> playbooks deal with situations of “[[normal science]]”: They map out the discovered world. They contain no mysteries or conundrums. They represent tilled, tended, bounded, fenced, arable land. Boundaries have been set, tolerances limited, parameters fixed, risks codified and processes fully understood.  

Playbooks are [[algorithm]]s for the [[meatware]]: they maximise efficiency when operating within a fully understood environment. They are inhabited exclusively by [[known known]]s. No [[playbook]] will ever say, “if the counterparty will not agree this, make a judgment about what you think is best.” All will say, “any deviations from this requirement must be approved by [[Litigation]] and at least one [[Credit]] officer of at least C3 rank.”

As far as they go, playbooks speak to the belief that, as [[normal science]], ''the only material [[risk]] lies in not complying with established rules'': they are of a piece with the [[doctrine of precedent]]: when you run out of road, you must appeal to a higher authority. This you do [[escalation|escalating]] to a [[control function]], the idea being that the [[control function]] will further develop playbook to deal with each new situation, the same way the [[common law]] courts do — ''[[stare decisis]]'' — and it will become part of the corpus and be fed back down into the playbook of established [[process]]es.<ref>This rarely happens in practice. [[Control function]]s make ''[[ad hoc]]'' exceptions to the process, do not build them into the playbook as standard rules, meaning that the [[playbook]] has a natural sogginess (and therefore inefficiency).</ref>

A playbook operates entirely ''inside'' the organisation’s real {{tag|risk}} tolerance boundaries. This is a good thing from a risk monitoring perspective, and is inevitable as a matter of organisational psychology — [[if in doubt, stick it in]], as [[Casanova’s advice|Casanova]] used to say — but it all comes at the cost of efficiency.

In theory the [[control function]] will in turn have its own playbook, and the “court of first instance” is as bound by that as the baseline process is by the basic playbook. There is an [[algorithm]], a recipe, and the main ill that comes about is by not following it. Hence the existence of an [[internal audit]] function.  

And are we even going to talk about the fact that the big shock risks that hit the systems are never ones that have previously been recognised, analysed and subjected to constant monitoring? [[Black swan]]s gonna be [[black swan]]s, yo.

Bearing in mind a playbook uses fixed instructions to delegate administrative tasks to unskilled personnel, it only works within normal operating conditions. For example:

:Risk Control Department ''A'' has stipulated starting position ''X'', but  has recognised that if a Client B does not agree to ''X'', a satisfactory compromise may be found at ''Y''. The playbook accordingly “empowers” the negotiator to offer ''Y'' without resorting to A for permission. Only if Client B should not agree to ''Y'' will there be an [[escalation]], back to Risk Control Department ''A'' who may sanction a further derogation from ''X'' to ''Z''. Should Client A not accept Z, there will then follow an extended firefight between risk personnel representing either organisation — albeit conducted through their uncomprehending negotiation personnel in Bratislava — which will culminate at final agreement at position ''Z'''.

By codifying this process, so the argument goes, not only may we engage materially cheaper negotiation personnel, but we effectively triage our client base and improve our systems and controls over the previous process, whereby the onboarding team just made it up as they went along.

But look at this from above: only positions X through Z are in anyway codified. The key decision has been made by Risk personnel essentially making it up as they go along. The playbook hasn’t helped. Rather it has convoluted the ''easy'' part of the negotiation.

By creating the playbook Risk Control Department A is stipulating position ''X'' where in reality it will accept position ''Z'' or even ''Z'''. The playbook, and all those wonderful systems and controls, in play only for a portion of the negotiation between ''X'' and ''Y'', being a position a mile behind the front line.

No doubt this will generate copious  [[management information and statistics]] with which middle management can regale their superiors with Gantt charts, [[dashboard]]s and [[traffic lights]] about the negotiation process. But all these gears are involved, and all all the systems is running over the uninteresting part of the process.  

At a cost: gathering all this data occupies working days and takes time: negotiation for ''all'' clients takes longer, and now the portfolio will be distributed over a range of points between ''X'' and ''Z'',  making practical control portfolio more difficult.

The client will not enjoy the negotiation process any more than you will, if you are presenting your client with its first experience of your organisation as the image of impersonal bureaucracy. With respect for our friends in the Slovak Republic, your new clients would prefer to be hand-held by a salesperson in London than a school leaver in a call centre in Bratislava.<ref>Granted, in this day and age, your client is almost certainly housing its negotiation probability out of a call centre in Bratislava, too. </Ref>

What to do?  Negotiation snags are either formal or substantive. Formal hitches arise when clients (or their negotiation teams, which will also have been outsourced to Bratislava) won’t ''understand'' your terms and will therefore challenge them. Substantive hitches arise when clients find your legal terms fundamentally unreasonable.

The answer to both lies in product [[design]] and consideration of [[user experience]].  

For the confusing and misunderstood terms, the answer is straightforward, but difficult: ''simplify'' them. This is usually not just a matter of language, but logical structure — though simplifying language often illuminates convoluted logical structures too.  

And, while financial markets drafting is famously dreadful, emerging technologies can help: run your templates through a GPT-3 engine and ask it to simplify them. It lwon’t be perfect and will make errors, but ''it is free''. Checking for errors and running quality control is what ''you'' are for. It will break the back of an otherwise impossible job.

And here is where the great promise to legaltech stumbles. It offers the capacity to do clerical jobs faster. It opens the door to infinite variability, optionality, within your standard forms. Tech can now accomodate any complications in your standard forms that you can be bothered dreaming up.  

''You do not want compllination