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Even sophisticated financial institutions — ''especially'' sophisticated financial institutions — need easily to render their contracts in simple fundamental terms, because that is how they risk manage them. | Even sophisticated financial institutions — ''especially'' sophisticated financial institutions — need easily to render their contracts in simple fundamental terms, because that is how they risk manage them. | ||
There is no machine,<ref>Not even the mythical [[Contract analysis|J.P. Morgan loan reading machine]] of [[Daniel Susskind|Susskind]] fan fiction.</ref> and certainly no human being, in the bowels of an investment bank that is constantly monitoring the text of its {{isdama}} battery to ensure every covenant is performed, every representation true, every implicit [[option]] buried in a contingent fallback exercised, or costed, [[as the case may be]]. These contracts are reduced to their a few basic economic parameters: that is all the firm’s creaking IT infrastructure can manage. The rest — those lawyer-confected paranoid contingencies the firm paid so handsomely for; that deal with unfeasible externalities, improbable scenarios and outlying tail risks are buried, filed away, to be dealt with, absent any context, by the legal | There is no machine,<ref>Not even the mythical [[Contract analysis|J.P. Morgan loan reading machine]] of [[Daniel Susskind|Susskind]] fan fiction.</ref> and certainly no human being, in the bowels of an investment bank that is constantly monitoring the text of its {{isdama}} battery to ensure every covenant is performed, every representation true, every implicit [[option]] buried in a contingent fallback exercised, or costed, [[as the case may be]]. These contracts are reduced to their a few basic economic parameters: that is all the firm’s creaking IT infrastructure can manage. The rest — those lawyer-confected paranoid contingencies the firm paid so handsomely for; that deal with unfeasible externalities, improbable scenarios and outlying tail risks are buried, filed away, to be dealt with, absent any context, by the [[legal eagle]]s in the heat of the improbable moment that they should arise. | ||
This extra detail is, therefore ''heft'': to the extent it confers optionality that the organisation [[Formal|formally]] ''and'' [[Substance and form|substantively]] knows nothing about | Come to think of it, it is a wonder there ''isn’t'' a squadron of waxen, hairless drones buried in some call centre in Bucharest rifling through that mountain of documents manually covering off that exact risk. It would make a great subplot for an [[Opco Boone]] adventure, in fact. | ||
This extra detail is, therefore simple ''heft'': to the extent it ''confers'' upon a firm optionality that the organisation [[Formal|formally]] ''and'' [[Substance and form|substantively]] knows nothing about it is, [[Q.E.D.]], in no position to exploit that right; if it ''grants'' optionality, it is a risk the organisation is short, but is not managing. In either case, the proverbial [[unknown known]]: we nod along and hope that, whatever happens, it isn’t significant. | |||
{{sa}} | {{sa}} |