Give it a try

all too often a negotiator is told, by a risk controller, well I won't die in a ditch about it, but at least let's give it a try.

Stop. The trade-off is between “give it a try” and “will anyone object?”:

“Will anyone object?” has an ascertainable, certain, upfront cost: the time and devotion of negotiation and, via escalation, risk management resources to clear the objection (whether the point is dropped or kept).

“Give it a try” has a delayed, remote and contingent benefit: - delayed because the right will only ever have any value upon a close out; - remote because any close-out, at any time, is extremely unlikely (<1% of counterparties would ever be closed out); - contingent because o it only has any value at all if we can persuade the counterparty to accept it o even if we can, we don’t know  whether we’d ever try in practice to exercise such a setoff,  whether, if we did, it would be enforceable and  whether, if we did and it was, there would be anything meaningful to set off against in the first place.

By my calculation, the present value of “give it a try” is close to zero. If the present value of “will anyone object?” is not zero, I wouldn’t even give it a try.

OB