On Being Battered by a Large Bank // Part 3 Boxing Clever!

Last week’s post looked at the Sales-Side Set Up and how it forms an essential part of preparing for a negotiation with a large bank or other large organisation.

This week I’m writing about Boxing Clever – how to expend your negotiation effort for maximum return.

 

The first thing is to recognise that this is not going to be a balanced conversation. Procurement is not there to reach an equitable solution.

The second thing is to recognise that Procurement’s ability to give on any issue is limited by a number of factors. It’s limited by the bank’s policy (sometimes), it’s limited by a lack of clarity within the bank as to who has the authority to make a decision (often), and it’s limited by the Procurement person’s fear of making a mistake and getting blamed (very often).

Given that you have a limited amount of negotiating dollars, what’s the best way to cash them in?

Here’s how I approach this.

  1. What’s your risk profile? If you have been trading for a few years, you will know where things go wrong and this is what you need to address. If you haven’t been trading for a few years, then you just have to take a view.
  2. Separate out real risks from theoretical risks. Not getting paid on time is a real risk. Not catering adequately for inflation is a real risk. Not delivering the product on time is a real risk. The difference between a liability cap of 1X and a liability cap of 2X is a theoretical risk. It’s theoretical because a) you may never be in breach, b) even if you are in breach you may not get sued, c) even if you get sued, the difference between 1X and 2X may not make a material difference.
  3. Avoid raising red flags. Ask a bank to indemnify you and you will get a visceral response from Procurement.  Ask a bank to compensate you and you will get a much warmer reception and, in practical legal terms, there’s not much difference between the two.
  4. Don’t get hung up in legal distinctions. There’s a lot of discussion in legal circles between best efforts, reasonable efforts, commercially reasonable efforts, and their variations. But making a distinction at theoretical level is one thing: making the distinction on each unique set of facts, assuming that they materialise, is a different thing altogether.

Next week: Negotiating

The first thing is to recognise that this is not going to be a balanced conversation.