risk leadership facing extreme contractual liability risk by bryan whitefield
DESCRIPTION
"Who is to blame?" How often do we read that line in a newsletter or magazine article about a legal dispute when it all went wrong? Too often, we ignore those little clauses in contracts called indemnities. A slight change in wording in an indemnity can vastly change the circumstances of who pays how much if it does all go horribly wrong.TRANSCRIPT
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Risk Leadership: Facing Extreme
Contractual Liability Risk by Bryan Whitefield
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Risk Leadership: Facing Extreme Contractual Liability Risk by Bryan Whitefield
How often do we read that line in a newsletter or magazine article about a legal dispute when it all went wrong? We ignore those little clauses in contracts called indemnities. A slight change in wording in an indemnity can vastly change the circumstances of who pays how much if it does all go horribly wrong.
"Who is to blame?"
Optimism Effect
or the
Pessimism Effect
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Risk Leadership: Facing Extreme Contractual Liability Risk by Bryan Whitefield
Optimism Effect
The optimism effect is the "It won't happen to me!" attitude.
Or, may be the extreme "Don't be absurd. Get on with your job!" attitude.
The result is often exposure to events that can shatter an organisation leaving the optimists ashen faced saying "I can't believe it!".
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Pessimism Effect
The pessimism effect is where commercial reality meets intransigence.
Some principals simply will not budge on their insistence to transfer unreasonable levels of risk onto the contractor.
Pessimistically, managers may say to themselves "Someone is going to take on this risk which they could never manage or afford to fund if the event occurs.
We have to agree to the indemnity.
Risk Leadership: Facing Extreme Contractual Liability Risk by Bryan Whitefield
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Risk Leadership: Facing Extreme Contractual Liability Risk by Bryan Whitefield
As a Risk Leader
You are part of decision makers consider the certainty of the upside the sales people are predicting vs the remote but potentially company-destroying risk of a one-sided indemnity clause.
You are well articulated risk appetite
for the organisation, signed off by the CEO/Board, along with some statistics about issues in similar contracts
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