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Risk management

March 6, 2013

The way that companies manage risk is forever changing and there is never a sure fire way to understand the complex and often opaque management of companies that supply critical services to clients. 2e2 is a prime example of a company that grew at a fantastic rate and was forever on the hunt for M&A opportunities to support its long-term goal of market dominance.

The difficulty that often arises within client organisations and this is especially so in UK Public Sector organisations is that procurement professionals are often blinded by the sales pitch of large multi national suppliers without truly understanding the scale or importance of the product or service they are buying.

This is acutely demonstrated by the numerous early termination of large joint venture (JVs) projects that appear to encompass;

  • IT support,
  • telecare,
  • document management;
  • invoice processing,
  • payroll and employment support
  • general information sharing across an organisation.

The tendency for large organisations to make quick decisions while trusting multi nationals is nothing new; the UK NHS project “Connecting for Health” was both ill conceived, poorly planned and a total failure that cost the UK tax payer £billions of pounds. Companies were awarded contracts based on ideas that couldn’t be realized, and contracts that couldn’t be concluded that were then negotiated by teams of lawyers inserting early release clause in case the inevitable happened; which in the case of CfH it did. The crazy idea that was CfH ended with very limited success and numerous contract termination negotiations with teams of lawyers facing off around board-tables all over Whitehall.

The strange thing is that there seems to be no loss of appetite for huge JVs with multi national organisations and very little control over the awarding of these contracts. Risk management should be at the forefront of any negotiation but ultimately the most important consideration is cost.

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written by David Clee

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