Navigating Negotiations Amidst Unprecedented Change: 2020’s Impact on Global Business Dynamics

This article has been authored by Matt Stockdale, an Associate Partner at The Gap Partnership, a leading negotiation training provider.

The year 2020 stands as a monumental juncture in history. As the world grappled with unprecedented challenges, the very essence of business and global affairs underwent a profound transformation. In navigating this new terrain, the art of striking a balance between safeguarding interests and nurturing relationships takes centre stage.

The events of 2020 and subsequent geopolitical scenarios have led to unexpected disruptions in global economies and governance. Governments have resorted to leveraging sovereign debt and implementing quantitative easing measures to stabilize economies. Amidst these challenges, global supply chains, cost efficiency, and globalization have come under scrutiny. This article explores the impact of these changes on local-level negotiations.

In response to the negative impacts of recent events, businesses are adopting a protectionist approach to their contracts. The definition of terms like “force majeure” and “liquidated damages” has become crucial in negotiations. Organizations are now focused on de-risking commercial elements within contracts, assessing and managing risks more closely.

Even in interdependent scenarios, non-negotiable redlines remain a vital part of negotiation. While collaborative and partnership approaches are favored, current circumstances and power dynamics dictate negotiation strategies.

The complexity of negotiations lies in the number of variables that can be utilized to build value. However, an increase in redlines and non-negotiables narrows the focus, often reducing negotiations to a single variable, usually price or fee. This reduction in variables can lead to a more transactional approach, affecting long-term relationships.

To address these challenges, it is essential to establish a clear understanding of negotiable and non-negotiable elements. Implementing a structured process, authorization levels, escalation policies, and stakeholder involvement can support a collaborative approach. Clarity at authority levels and escalation procedures fosters trust and enables more effective negotiation.

An effective way to maintain collaboration while de-risking negotiations is by pairing opposing variables. By capping liquidated damages or exploring payment terms and contract length, risks and securities can be balanced. However, it is crucial to carefully consider the impact of the risk and quantify the commercial output.

Internal alignment among different divisions, particularly finance and legal, plays a significant role in successful negotiations. Understanding an organization’s positions and aligning them with the desired outcome is vital. Effective internal negotiation and alignment facilitate creativity between contracting parties and enable value-added negotiations.

In the modern era, the focus on de-risking contracts and positions can hinder collaborative efforts and value creation. A reduction in available options and an increase in non-negotiables funnel negotiations toward a single variable, potentially damaging long-term relationships. Considering all available options and understanding risk impact is essential in adapting to changing market conditions.

Key takeaways:

– The recent global events have prompted businesses to adopt a protectionist approach, leading to an increase in non-negotiable terms and redlines in contracts.

– Reducing the number of variables in negotiations can result in a more transactional approach, potentially undermining long-term relationships.

– Internal alignment and understanding between different divisions within organizations are crucial for negotiating successfully, promoting collaboration, and creating value.

Richard Maxwell

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