Saturday morning for breakfast I took in a nice cup of coffee and some law school lectures. Most would think this is a horrible way to begin a weekend but most are not nerds like me. I was watching a video my contract law professor posted in his lecture on contractual disputes arising from catastrophic events, or “force majeure” events, when I had a thought. A force majeure (French for major force) clause in a contract provides defense for one or both parties if performance is hindered, prevented, or delayed due to an Act of God or other catastrophic events.
My professor’s lecture went on to state that certain “force majeure” events can be agreed to in a contract that limits the risk allocated to a certain party if they are unable to perform due to an uncontrollable event. During the review of any contract with one’s lawyer the “what if” game is played often and frequently to see how this contract could go sideways and put the party in an adverse position, one exposed to losses in some form of utility. The lawyer and their client will go over the contract with a fine-toothed comb to see where any gaps or vulnerabilities exist that could lead to potential problems down the road if not addressed at the onset before the agreement is entered into.
Now, the contracts entered into by businesses range in complexity and the opportunity they present in terms of helping the organization reach its goals and objectives. However, each one contains risks that are carefully (we hope) analyzed to identify, assess, and deal with the “what if” scenarios that do not exist yet but could. My question is…if we put this much effort into ensuring contracts are not filled with unnecessary or uncalculated risks, why is this not being done at the highest levels of the business in the form of enterprise risk management?
A strategy, like a contract, deserves the same level of scrutiny, analysis, and “what if-isms” to know the ins and outs of the path ahead and the challenges that lie in its wake. Challenges that if not calculated for can turn into problems, problems that delay success and increase costs. Just some morning coffee thoughts…
-CR
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