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If in doubt, stick it in: Difference between revisions
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There are two kinds of pointless things we habitually stick in contracts: absurd asks by the risk team, which all at the coalface know will be just as habitually rejected by any counterparty advisor with a pulse, even if the senior risk team draw come kind of delusional comfort from the fact they such terms are being sought at all; the other is matters of tedious compliance — be they accommodations of [[Prime brokerage disclosure annex|misconceived pedantries buried in developing regulation]] or internal [[policy|policy overreactions]] brought about during the recovery process from [[blunt trauma]] — in either case resulting in gnomic confections piped into the back end of your contract templates like so much kitchen dirt swept under a rug, only to fossilise there, unloved, undisturbed, until overlaid with yet more scar tissue. | There are two kinds of pointless things we habitually stick in contracts: absurd asks by the risk team, which all at the coalface know will be just as habitually rejected by any counterparty advisor with a pulse, even if the senior risk team draw come kind of delusional comfort from the fact they such terms are being sought at all; the other is matters of tedious compliance — be they accommodations of [[Prime brokerage disclosure annex|misconceived pedantries buried in developing regulation]] or internal [[policy|policy overreactions]] brought about during the recovery process from [[blunt trauma]] — in either case resulting in gnomic confections piped into the back end of your contract templates like so much kitchen dirt swept under a rug, only to fossilise there, unloved, undisturbed, until overlaid with yet more scar tissue. | ||
===Worked example=== | |||
A [[credit officer]] murmurs, distractedly, “well [[I'm not going to die in a ditch about it]], but at least ''let’s give it a try''.” <br> | |||
“Give what a try?” <br> | |||
“Well, say we exclude contractual liability except for loss arising from our [[gross negligence|''gross'' negligence]]?” <br> | |||
“'[[Gross negligence|''gross'' negligence]]? But surely no sensible client will accept that?” you say.<ref>Conventional wisdom has it that US counterparties ''will'' unblinkingly accept gross negligence standard. Which makes you wonder about conventional wisdom in [[US attorneyAmerica]]. But anyway.</ref><br> | |||
The risk officer shrugs. “Perhaps so”. But why don’t we [[give it a try]]? | |||
Because asking for a term you don’t need but to which a counterparty will object has an ''actual'' cost: The time and devotion of negotiation and, via the [[circle of escalation]], [[risk management]] resources to resolve the client objection. You can only clear it by persuading the client to accept the term, persuading your [[risk management]] team to live without it or walking away altogether. | |||
You will expend ''some'' time and resource wherever the client objects, even if it immediately drops the point. The longer that takes the more expensive it will be. That cost may be ''[[de minimis]]'' per negotiation, but across many negotiations across a portfolio ''[[de minimis]]'' costs add up and contribute to the total cost to the organisation of the [[onboarding]] process. That is ''not'' [[de minimis]]: just ask the [[head of the documentation unit]] how often [[chief operating officer]] hungrily regards her team with a view to offshoring, rightsizing, automating or otherwise eviscerating it. | |||
If “[[give it a try]]” has a benefit at all, has a delayed, remote and contingent benefit. The right, if you do get it, will only ever have any value in the unknown future if the circumstances prevail that entitle you to exercise the right. | |||
{{sa}} | {{sa}} | ||
*[[Audit paradox]] | |||
*[[Onboarding]] | |||
*[[Circle of escalation]] | |||
*[[Gross negligence]] | |||
*[[Why are contract forms so long?]] | *[[Why are contract forms so long?]] | ||
*[[Negotiation oubliette]] | *[[Negotiation oubliette]] | ||
*[[Credit department]] | *[[Credit department]] | ||
{{ | {{ref}} | ||
{{c|Plain English}} | {{c|Plain English}} | ||