Managing risks is extremely important when it comes to a business. Almost every business has a contract with somebody, whether it be a client, vendor or service provider or employees and contractors. Contracts, like everything else, can pose a risk to your business, but there are ways that risk can be managed. Here's a list of 5 simple ways to manage your contract risk.
- Start with your form or template, not someone else's; this will always give you an advantage no matter how much it may change during a negotiation.
- Uniformity in what's negotiated; you should figure out what is:
- critical and non-negotiable;
- important, but negotiable if necessary;
- routine and always be negotiable.
- All of the above are legal and business decisions, but figuring it out and sharing with your team keeps everyone on the same page. It is information that should be in your contract management system to streamline your contracts process.
- Always start with a new document. Don't take the one from your last deal and edit, it's going to eventually wear down your legal protections.
- Make sure all the formalities are in place. As ridiculous as it may seem, very often contracts are unsigned or don't have the necessary exhibits or attachments; part of your process should be verifying all of this is in place.
- Put a contract management system in place, and abide by it. Doing so will significantly reduce the contracting risk on your business.