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[[Risk controller]]s are short an option. They are incentivised to err on the side of caution: they don't get a bonus if the client generates extra revenue, but they will be regarded as having failed if the client blows up owing the firm money<ref>In theory. But see the [[circle of escalation]].</ref>. So no wonder there are overreaches in the terms they require in general client documentation. | [[Risk controller]]s are short an option. They are incentivised to err on the side of caution: they don't get a bonus if the client generates extra revenue, but they will be regarded as having failed if the client blows up owing the firm money<ref>In theory. But see the [[circle of escalation]].</ref>. So no wonder there are overreaches in the terms they require in general client documentation. | ||
While credit teams do not typically monitor or collect data about the frequency with which they invoke specific credit terms, we know for sure that: | While [[credit]] teams do not typically monitor or collect data about the frequency with which they invoke specific credit terms, we know for sure that: | ||
*Well over 90 percent of client contracts never default at all, | *Well over 90 percent of client contracts ''never default at all'', | ||
*Of those contracts which ''are'' closed out, in nearly all cases the cause of default is failure to pay or insolvency. These two events of default are generally not challenged during the negotiation process (it is hard to argue that if you are bust or you fail to make payments, your counterparty should not be able to terminate your contract! | *Of those contracts which ''are'' closed out, in nearly all cases the cause of default is failure to pay or insolvency. These two [[Event of default|events of default]] are generally not challenged during the negotiation process (it is hard to argue that if you are bust or you fail to make payments, your counterparty should not be able to terminate your contract! | ||
====[[Barnacles]] and the effluxion of time==== | ====[[Barnacles]] and the effluxion of time==== | ||
''“[[Rework - Book Review|Policy is institutional scar tissue]]”'' - [[Jason Fried]]<br> | ''“[[Rework - Book Review|Policy is institutional scar tissue]]”'' - [[Jason Fried]]<br> | ||
{{barnacles}} | {{barnacles}} | ||
'''Summary''': ''Over-processing arises through excessive caution in credit terms and through the natural, pragmatic process of getting negotiations across the line. The length and complexity of documents creates significant {{wasteprov|over- | '''Summary''': ''Over-processing arises through excessive caution in credit terms and through the natural, pragmatic process of getting negotiations across the line. The length and complexity of documents creates significant {{wasteprov|over-processing}} wastage and, as a by-product, creates significant {{wasteprov|waiting}} and {{transport}} wastage as well through unnecessary [[escalation|escalations]]." <br> | ||