On March 9, 2023, Silicon Valley Bank collapsed. Customers attempted a $42B run on the bank, spooked by Moody’s downgrading of its bond rating. By March 10th, the California bank regulator seized the bank and assigned the FDIC as the receiver.
Within hours, boards across America were asking a deceptively simple question: “What’s our exposure?” For companies with banking relationships (with SVB or not), vendor agreements, payment obligations, the race was on to understand contractual obligations before the market opening.
The winners and losers in these crises weren’t determined by the quality of their executed contracts – they were determined by how quickly they could find and analyze them.
The Board-Level Reality Check.
Most CLOs or GCs can tell you their top five contract risks from memory. They are deeply invested in key relationships and are aware of where all the proverbial bodies are buried. But risks live beyond the top 5 contracts. No matter how amazing your legal leader and their team are (we believe they’re great!), it isn’t reasonable for this data to be at the tip of their tongues across the relevant parts of the business.
When crisis strikes – whether a vendor's bankruptcy, data breach, cyber event, supply chain disruption, tariff change or geopolitical event – boards need answers about tail risks buried in hundreds of agreements. The difference between “we’ll have an answer by the end of the week” and “here’s what we know right now” can mean millions to your business.
Consider President Trump’s tariff changes (price adjustments? Conditional pricing?), the US’s forcible removal Venezuelan President Maduro (supply chain disruption?), a vendor announcing Chapter 11 (termination, right?), or even COVID (force majeure trigger?). In each case, the board’s tolerance of complete uncertainty falls to zero.
Pillar 1: Contract Intelligence, not Contract Storage.
Your legal department, sales team, or HR/enterprise system maintains thousands of agreements across multiple systems, practice groups, and online files. Legal teams on the forefront of contract review have searchable contract data by key issues that can be pulled, analyzed and verified in moments. This is more than contract-lifecycle management. Many of these critical terms aren’t easily tagged given that they are deep legal issues that require an understanding of context and nuance. They require data extraction on subtle issues that may live in non-obvious places. Running a query by amount, geography, or jurisdiction isn’t enough. Understanding that your tariff language triggers early termination is managing actual business risk. In addition, it’s not just what was signed – it is what is in front of you under negotiation, too.
Pillar 2: The 48-hour standard.
Leading CLOs establish a 48-hour standard for crisis response. Within two business days for any material event, the legal team should prep C-suite executives for the risk-related questions they should be expecting from the board. (If it’s data, privacy or security breach, you’ll be lucky to get 24-hours.) Rapid turn-around requires well-functioning, tested playbooks, cross-functional protocols, and clear communication channels with business teams.
As someone once said, never waste a good crisis. The board, C-suite, and business teams will hang on legal’s every word. Use the opportunity to demonstrate why investment in legal (the ounce of prevention) truly is worth more than the pound of cure. Remember: boards are not looking for perfect. They are looking for clear signals and a reasonable direction – as much “certainty” as the situation can provide. They cannot make decisions with 0% visibility.
Pillar 3: Enterprise Risk Integration.
Legal risk doesn’t exist in isolation. The most effective CLOs and legal teams integrate contract risk assessment (pre-signature and post-signature) into broader enterprise frameworks. They seek macro-level learning from negotiations and guide teams to adjust and evolve. Things like regular coordination with sales teams, client service, finance, operations and compliance help legal keep their proverbial ears to the ground so that risk is managed in light of what moves the revenue needs. It also helps internal teams understand key issues with legal. The more each team trusts each other, the faster the boat sails.
Contract risk management deserves similar attention. Are your capabilities ‘board-ready’? Can you afford to approach the next crisis without them? If that’s not enough to convince the CFO of investment in legal tech, ask whether they are ok advising the board to delay a decision until the proper information can be found. 🤣
Be sure that any system you adopt works for you: a playbook that can truly identify your critical legal issues amidst the context and nuance that make contracts a rich source of data. Most importantly, it should reflect your team’s understanding of how the key contract data gives you the roadmap for response.
The companies that weather these kinds of storms aren’t the ones with the most sophisticated or largest legal departments – they are the ones who can answer the board’s questions in real time.
We are in a time of increasing uncertainty. Contract intelligence isn’t a luxury – it’s a business imperative.
