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Most Negotiated Terms 2020: Act tough or play fair?

October 5, 2020

Markets are in turmoil, businesses face massive uncertainty. In this situation, how and what should I be negotiating?

COVID-19 is transforming the landscape for trading relationships, creating an environment that is unstable and unpredictable. Commercial negotiators are uncertain whether to address this through increased collaboration, or increased confrontation.

The 2020 worldwide study of the Most Negotiated Terms (released on October 7th) reveals a growing gap between industries. Some – like aerospace and oil and gas – can only recover through increased cooperation. Others, like the garment industry or hotels and leisure, have opted for more draconian measures, cancelling contracts and withholding payments. For many, that choice has often depended on the strength of their balance sheets. Do I play tough – and perhaps drive my customers or suppliers to the wall.? Or do I play fair – and try to sustain my customers and suppliers for better times ahead?

Hard choices

The last few months have presented hard choices. Decisions about what and when to negotiate can be critical to survival. Many contract negotiators hope that COVID-19 represents a catalyst for lasting change. For years they have recognized that negotiations tend to be competitive, focusing on risk allocation and price, rather than mutual value. ‘Win-win’ has been little more than an aspiration. Now, almost 60% believe that the pandemic is a catalyst for increased collaboration, for greater transparency of data and improved communication (65%) and for fairer allocation of risks (44%).

To achieve these positive changes, the focus of negotiations must shift to areas of shared interest – increased clarity over mutual goals and objectives, clearer definition of roles and responsibilities, better approaches to the management of change. In the virtual world created by COVID, technology has come into its own – and will be a critical element in enabling change. As case studies increasingly show, it can provide improved data flows, faster and more timely communications, greater inclusion and diversity of ideas and opinions.

Trade – and with it the speed and depth of economic recovery – depends on trust and cooperation. How and what we negotiate has direct impact on whether there is trust, whether there is cooperation. This report shows that the world is finely balanced between forces that increase competition and those that will support collaboration. Each has its time and place. The secret of good negotiation is to understand when to compete, when to compromise and when to collaborate. COVID has perhaps helped us understand the criticality of this evaluation – and that in recent years, we have go the balance wrong.

The Most Negotiated Terms features as one of the major topics in World Commerce & Contracting’s TASK series of free learning programs, including a webinar with leading technology provider Icertis on October 7th, 2020.

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