The Sirion Blog

Purpose of a Contract, Post-execution. One Word, Stop-Loss.

In an ideal world, the need for a contract would perhaps be non-existent. That will not happen in our lifetime, and contracts will have a fundamental role across civil, private, and even inter-planetary deals (e.g. Mars and Moon exploration related contracts at NASA). Many insightful discussions with one of my mentors (Mark Voytek, Chief Customer Officer, SirionLabs) have led me to delve into the true purpose of a contract. One word from my days in trading systems truly defines it – ‘stop-loss.’ The reach and seriousness of contracts affects nearly everyone in the real economy, and it has only become increasingly complex.

The art and science of building a contract invests a lot in trying to choose the right ingredients (from parties, location, products, services, down to punctuation); yet that is only as good as the written word unless it’s actual performance is understood post-execution. Was the supplier able to meet standards, was there a bonus eligible for early delivery of services, are the ethical practices covered under master services really being performed, what was the last audit finding and actionable, ….. and the list goes on.

The scope for operational efficiency improvement is secondary to the ever-present need of managing risk and exposure to adverse events, and in some industries that includes a black swan event.

So, what is your risk appetite? Do you know what your downside exposure is? What can you gain? Can you afford unknown risks or known risks that are left uncontrolled and fuzzy?

SirionLabs’ technology specializes in giving you true value, exposing risk across operational, service level, and financial aspects to name a few – giving you a clear picture to derive real financial impact, from regulatory breaches to operational supply chain flash-points.

To learn more about how Sirion CLM can help your organization manage contract and revenue risk, check out our latest webinar.

P.S. For those who are curious if ‘stop-loss’ is one word, here is a reference. Whether on the buy-side or sell-side, or for governance contracts, the core intent is to limit the downside.