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“Governance – What Governance?”

by Tim Cummins.

Top Ten Most Frequently Negotiated Terms Reveal Continued Focus On Failure

Each year, IACCM collects data from more than 500 international companies and organizations, representing several thousand contract negotiators. We ask them to tell us which terms and conditions they negotiate most frequently. The data tells us where time is spent; it reflects changing issues and concerns; and it also reveals much about the ways companies behave and the value they place on their trading relationships.

Once again, the results for 2006 indicate many opportunities for rethinking the role of contracting in shaping relationships, supporting brand image and as tools for sophisticated risk management – as opposed to blunt instruments for risk allocation. This report highlights the results and suggests new approaches that could result in significant business benefits.

It is argued that the internet and today’s networked economy have brought new dimensions to the management of risk. They provide a global medium through which reputations and brand image can be rapidly built or destroyed. As companies have discovered, failures to behave ethically, to honor their commitments, to meet market expectations can have dire consequences.

Leading consultants and business gurus have emphasized the growing importance of the ‘quality of interactions’ in determining a company’s market image and reputation. Over the last year, we have seen signs that corporate executives understand the direct link between how a company negotiates, the commitment terms it offers and market perceptions of how easy they are to do business with.

In such an environment, we might expect to see new approaches to risk management. Why spend so much time on traditional methods of risk allocation when suppliers can potentially be held to account through the potential for damage to their brand image?

For example, McKinsey “Competitive Advantage From Better Interactions” (McKinsey Quarterly, Volume 4, 2005)


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April 2007