Walk-away
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Negotiation Anatomy™
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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 your ‘get up from the table, snap on your Wayfarers and say, “well I can see we’re wasting our time here.”’ moment.
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. Closing out an agreement is about cutting losses, not making profit. You make a profit by trading under the agreement. In a perfect world, everything is rosy, we each make bags of money trading with each other and, once it’s inked, no one casts a backward glance at that master agreement.
Therefore these events:
References
- ↑ Don’t take a piece of paper to a knife fight.
- ↑ Because if they happen a lot you have much bigger problems with client selection or risk management.