How can you manage deal risks with new partners?

1 Assess the partner's reputation

Before you sign any agreement, you need to do your due diligence on the potential partner. Research their background, track record, financial stability, and legal compliance. Check their references, reviews, and ratings from previous or current clients, suppliers, or investors. Look for any red flags, such as lawsuits, scandals, fraud, or poor performance. You want to work with a partner who has a good reputation, shares your values, and meets your expectations.

2 Negotiate clear terms and conditions

One of the main sources of deal risk is ambiguity or misunderstanding of the terms and conditions of the partnership. To avoid this, you need to negotiate and document every aspect of the deal, such as the scope, objectives, roles, responsibilities, deliverables, deadlines, payments, incentives, penalties, and dispute resolution mechanisms. You also need to specify how you will communicate, monitor, and evaluate the progress and performance of the partnership. Make sure that both parties understand and agree on the terms and conditions, and that they are legally binding and enforceable.

3 Mitigate operational and financial risks

Another source of deal risk is the potential disruption or loss of your operations or finances due to the partnership. To mitigate this, you need to plan and implement risk management strategies, such as diversifying your sources of income, securing your assets, insuring your liabilities, maintaining your cash flow, and complying with regulations. You also need to monitor and control the quality, cost, and delivery of the products or services that you and your partner provide. You should also have contingency plans in case of unforeseen events, such as delays, errors, accidents, or breaches.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?