Walk-away

Negotiation Anatomy™ →Go uptown {{{2}}} Walk-away | Escalation | Algorithm | Heuristic | subject matter expert | Operationalisation | Playbook | Smart contract | Dead horse | Knife fight | 7 wastes | Cruddy legal advice Index: Click ᐅ to expand: Negotiation Negotiation hacks Contract Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

In theory, walk-away points are straight forward enough: “this term is so fundamental to our risk management that we can’t do without it. Therefore, if the counterparty won’t agree it, we walk away”. Terminate the negotiation with extreme prejudice. This is the “get up from the table, snap on your Wayfarers and say, “well I can see we’re wasting our time here.”

Thus, a genuine walk-away represents a fundamental lack of agreement. Being fatalistic for a moment, and assuming parties know their limits and are acting sensibly, if the parties are not able to agree, it is better to find that out as quickly as possible – sooner find that out now, than after nine ugly months in the trenches. So, the theory is straightforward: Set clear walk-away points articulate them clearly, stick with them, and recognise a bust negotiation early. Don’t flog a dead horse.

So far so good.

But contentious negotiation points tend to be the tail events: disaster scenarios: total loss of trust; insolvency – things that happen when the contract doesn’t go as planned. You don’t ask for an event of default because you hope to use it. In a perfect world, everything is rosy, we each make bags of money trading and no one casts another glance at that master agreement.

Therefore these events:

• should never happen, if you get your risk management right
• will only ever happen to a tiny portion of your portfolio even if you don’t
• are not options to be automatically exercised if the event is triggered: they’re protections for your position if the worst should really happen.