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Contract Management

The Importance of an Exit Strategy

Jul 20, 2016 by Branan Cooper

Why do I want to go into a relationship thinking about the exit?


It does seem counter-intuitive, I suppose. You're all excited about signing up this great new provider who is going to help solve one of your biggest challenges and, before you even start, you're talking about the "what if's" of how the book could end.

I always use this analogy - you're boarding an aircraft and you know that all the statistics say it's going to be a safe flight, yet the flight attendant takes time to carefully review safety procedures and point out the emergency exits. Really, an exit strategy is no different - you prepare for the worst case scenario.

Okay, I buy into the concept but what is an exit strategy?

It's really very simple. Consider what might happen if the company with whom you're doing business suddenly ceased to exist - maybe it's a natural disaster, maybe they suddenly go out of business... what do you do?  

Well, long before that happens and hopefully, even before you enter into a contract...

1. Discuss it with the people in your company who are the experts on what to do. In some cases, it may be as simple as switching providers.

2. Write out a detailed timeline of what would need to happen to minimize disruption to your business and your customers.

3. Consider all of the alternatives, whether it would be a slow unwind or a hasty plan that can quickly be put in place.

4. Have it reviewed and, if possible, tested and even potentially included in the contract.

5. Review the exit strategy periodically with those same subject matter experts to be certain it's accurate and detailed enough.

Finally, relax - chances are you'll never need it

The vast majority of the time you will simply "hope for the best and are now prepared for the worst" and you're well versed in every potential problem that could cause a disruption to your business or impact your customers. So, you have done your part and can relax. You hopefully won't need to use it, but you are ready if you do.

Exit strategies often slip through the cracks, download our Navigating Your Vendor Management infographic to learn about what additional aspects may be hurting you - we call them potholes - and needing more attention within your vendor management processes.

Navigating Vendor Management Infographic

 

Branan Cooper

Written by Branan Cooper

Branan Cooper is the Chief Risk Officer at Venminder. Branan has nearly 30 years of experience in the financial services industry with a focus on the management of operational and regulatory processes and controls—most notably in the area of third party risk and operational compliance. Branan leads the Venminder delivery team as the third party risk management subject matter expert in residence. Branan also serves as an industry thought leader. He's a member of InfraGard and the Professional Risk Management Industry Association (PRMIA). And, he was selected in 2018 as an advisor to the Center for Financial Professionals (CEFPro) and board member for the Global Sourcing Resource Network (GSRN).

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