Document risk
Document risk
/ˈdɒkjʊmənt rɪsk/ (n.)
The risk an organisation faces that loses money because of substandard legal contracts with its customers.
The ordinary means of defending against document risk is, therefore, to treat contract negotiation as some kind of engagement with terrorists, or at least hostile foreign powers, and to leave absolutely nothing to chance.
Of course, when you treat a customer like a presumptive criminal, it will tend to behave like one — this is the lesson of the Stanford Prison Experiment — as as a result commercial contracts look less like the exchange of lavender scented love-letters you would expect from deeply smitten long-term commercial partners, and more like downtown Beirut in 1976 just after a particularly vigorous shelling.
Knowing one has a portfolio of such battle-tempered contracts bestows great comfort on senior personnel in credit and legal, for it tells them all bad things that could come to pass have been anticipated, and accommodated, by the battery of preternaturally paranoid negotiation specialists they have at their disposal. They will hold forth at the merest invitation about the imperative of having “strong docs” as they see it, and will cite in support of their proposition the colossal resources the firm commits to its client documentation effort.
Now only a fool rushes in to pop a credit officer’s balloon, but seeming foolish has never stopped the JC. So here goes: we say this is a false comfort. Our evidence is purely, but compendiously, anecdotal. Client documents are are a wonderful thing in concept, in the abstract, just as long as you never have any critical need to look at them.
Actually reading at them, especially with a view to doing something with them, is invariably a chastening experience. They were forged, as we have said in a series of guerilla skirmishes in a white-hot urban conflict. Inevitably, there is incoming, and usually the bullet holes turn out to be just where you don’t want them.