What is your business' appetite for contractual risks?
Do you know? "Does it depend?"
Is it payment terms? Does the length and type of license grant impact your services? Is it reputational harm or the ability to sunset a product?
After graduating law school, I was fortunate to begin my legal career working in the building products and construction industry for about 4 years. Compared to other industries I have worked in, the construction industry was my crucible for understanding contractual risk allocation. Because the risks of personal injury and property damage were guaranteed to happen at some point, the companies I worked for had their risk appetites well documented and maintained a set of identifiable positions for contract terms. Additionally, the companies had policies and procedures in place to mitigate contractual risks they accepted. As in-house counsel for these businesses, I handled the entire contract negotiation and risk allocation process from cradle to grave and provided quarterly trainings to employees on best practices for the known risks.
Those years forged my negotiation skills, creativity for solutions, and provided a bird's eye view of various companies' appetite for risks. Participating in business is risky. Often times the larger the risk, the larger the reward—or disaster. Although lawyers often get a bad rap for being risk-adverse, there is wisdom in taking informed risks and often times the only way to grow or scale a business.
If your answer to my opening question does not consist of 3-5 identifiable positions that you can articulate within 30 seconds, then this is a good pause moment and an action item for you:
- Do an internal inventory of what occurrences with a potential partner, vendor, and client would drive your business forward
- What would stop your business
- What could ruin your business
If you need assistance creating your risk appetite or even understanding potential risks in your industry or with certain partnerships, reach out for consultation to further discuss.