by Tiffany Kemp
Yesterday’s IACCM member meeting at Fujitsu’s elegant offices in Baker Street, London, was well attended by senior commercial management and procurement professionals from a good cross-section of IACCM’s corporate membership.
My own presentation looked at how to facilitate positive commercial relationships with good risk management, when the business world we inhabit is becoming increasingly complex and fast moving.
Together, we examined the recent de Beers v Atos Origin case, which provided a comprehensive example of how easily things can go wrong. In that particular case, there were issues of:
- Functional novelty (Atos Origin had never developed a diamond aggregation system before!);
- Geographical complexity (the system had to operate across a number of African countries);
- Technological complexity (it was to be developed using Agile development methods); and
- Time and cost pressure (less than eight months to develop and implement the system, on a fixed-price basis)
Add to that a customer relationship in which the client, de Beers, appeared to be happy pushing all the risk onto the supplier, Atos Origin, and you have a recipe for trouble from the start.
It’s interesting that the commercial and legal team are generally made responsible for ensuring that contractual risks as appropriately identified, mitigated and managed.
Why?
Because the points in the customer relationship life-cycle where risk opportunities arise, and can be quickly mitigated, are not those in which the commercial or legal team has a significant involvement. If you think about your own business, your relationships with customers can be broken down into the following steps:
- The prospecting and sales phase
- The contracting and negotiation phase
- The delivery phase
Out of these three, which of them provide the best opportunities to get close to the customer, identify risks and issues, and resolve them amicably?
Arguably, the sales and the delivery phases fit the bill far more effectively than the contracting and negotiation phase. After all, when things go wrong in a relationship, leading to disputes and litigation, they generally go wrong because expectations have been mis-set (the sales phase), requirements have been mis-understood (sales again), or delivery has not gone smoothly (the delivery team). It’s rare for a client to sue a supplier because its commercial negotiators were incompetent, and yet they are the only ones we make responsible for contractual risk!
So if we were to distribute the understanding of commercial and contractual risk, and the language in which it is expressed, to those in the business who are in the best position to do something useful with it, wouldn’t that help?
If the sales and bid development team had a clear view on the impact of the discussions they were having with the client on the business’s contractual position, wouldn’t they be better equipped to use those opportunities to identify and mitigate risk?
And if the delivery team understood how their actions contributed to contractual risk, and what the potential impact could be for the business if certain client behaviours were not addressed swiftly, wouldn’t they act firmly and decisively to head-off risks before they became issues?
My view is that this is, in fact, the ONLY way that we can sensibly manage risk as projects become ever-more complex, and the workload on the commercial and legal function increases. Rather than employing eye-watering numbers of commercial managers and lawyers, let’s share a little knowledge, and develop a culture of commercial competence – and build great customer relationships while managing risk effectively.
If you’d like a copy of the full presentation, with detailed presenter notes, please email liya.dabup@devant.co.uk. To talk about how Devant can help your organization build its commercial competence, get in touch!
