Managing Risk in Complex Collaborative Relationships

Last Wednesday I attended an IACCM seminar 'Risk and Compliance' at the Baker and McKenzie offices in London. The session centered around the way in which lawyers approach risk and seek to protect their clients/companies.

The IACCM's 'Top Ten Negotiated Terms' survey highlighted indemnities and limits of liability as the main issues in today's contract negotiation, which suggests that we are still focussing on limiting our liability in the event that things go wrong, rather than preventing them going wrong in the first place. See the previous post on Preventive Law for more thoughts on this topic.

The seminar looked at how to get lawyers taking a more pro-active approach to contract structure and negotiation and, if I'm honest, didn't seem to have much in the way of answers. I left feeling vaguely unsatisfied, and convinced that a better approach should exist somewhere.

Yesterday we held the first joint workshop in Helsinki for Collaborative Contracting in R&D projects, and this topic was hot on the agenda. Interestingly, the most practical solution to this very modern problem was a very old-fashioned one - trust. It seems that in an increasingly complex world, rather than trying to legislate for everything in huge and unwieldy contracts (and failing), the alternative is to contract firmly only for the core deliverables and have a much looser provision for the 'known unknowns' (thanks, Mr Rumsfeld).

This mechanism requires a foundation of trust, which will be established over a previous working relationship, and also requires that the parties are both motivated by the same outcomes (albeit for different reasons). And it is structuring the deal so that it rewards good behaviour for both parties that is the real challenge.

As always, all thoughts and comments on this topic will be appreciated!