The negotiator’s best kept secret: The risk adjusted strategy

You might fancy yourself a pretty decent negotiator.

One that’s been around the block, learned from both their mistakes and their successes, refined and honed their skills over time and many a tricky deal, and had some training and mentoring along the way.

But let me ask you this: are you taking risk into account in your negotiations? Moreover, are you factoring in risk as one of the most important and underrated variables in a world where tariffs reign supreme and commercial markets are routinely tuned into the ever-evolving global conflicts and leadership changes? Because the truth is, once risk has been taken into account, the full value of the contract is transparent.

So, are you really, genuinely and hand-on-heart treating risk as an opportunity for value creation?

Consider the lovely and of-the-moment phrase, risk adjusted strategy.

I like this phrase, these words: I get the intention; they are wise. Putting these same words into a business context, or specifically into the context of negotiation, I strongly recommend the inclusion of this thinking into the strategic and tactical planning processes of every commercial negotiator.

Change is constant. The goal posts keep moving. We are experiencing rapid change with massive impacts. By understanding the risks that could affect our commercial negotiations, it is highly appropriate to also include a risk adjusted strategy when negotiating.

Power is governed by time and circumstance. Time is one of the most important levers available to a skilled negotiator, but now considering the speed and pace with which world events change, we have to also raise the importance and relevance of understanding the circumstance lever, and take risk adjustment more seriously. Both parties are theoretically “in it together” as dependency is high. A problem for one is a problem for both. 

The world is seeing unprecedented times. This got me thinking about the need and importance for skilled negotiators to include a risk adjusted strategy in their orientation and approach with their counterparts.

It is about planning all the way to the end. In fact, the ending is everything. To reap those rewards you need to take into account all the possible consequences, obstacles and twists of fortune that may affect your objectives. Doing this allows you to consider different scenario plans so you are not overwhelmed by circumstances that arise. You determine the future by thinking far ahead. When thinking ahead, have a risk adjusted strategy.

There are a number of dictionary definitions of risk for the reader to consider. Risk is the possibility of danger, harm or hazards; a potential loss. Risk is about the probability of an uncertainty happening.

In our commercial negotiations, we need to understand the possible risks involved (both real and perceived) and indeed the people involved too. Different people respond to different situations in different ways, which will vary depending on whether they are risk averse, risk balanced/neutral or a risk taker.

Understand that individuals are not necessarily consistent either, so we need to also understand the human element; what is their acceptable tolerance of or appetite for risk?

There are many types of risk. We need to plan for events out of our control. We should distinguish between certainty and that tangible value impact; and then uncertainty and/or the possibility or probability of the occurrence and the seriousness to both parties. The estimation of possible risks occurring compared to the possible negative consequences.

It allows us to identify a potential problem, assess and gauge the probability of the occurrence and the seriousness of the possible impact, so we can then prioritize actions to prevent, mitigate, minimize or avoid the hurdles and pitfalls. Secondly we can ensure we have built contingency actions into our plan, so we are not only building a strategy to succeed, but also planning for a potential failure.

That is robust risk management.

I have eight questions for you to ask yourself that will help in your negotiation planning:

1.  What is the potential problem?

2.  What can you do to stop this from happening?

3.  What is the probability of the occurrence?

4.  What would be the seriousness?

5.  What is your contingency if you cannot prevent this from happening?

6.  Does this problem need to trigger a change of strategy?

7.  Which stakeholder will take responsibility?

8.  How will this be communicated internally and externally?

A skilled negotiator will factor in the identification, assessment and prioritization of risks followed by a coordinated and economical application of resources to minimize, monitor and control the probability and/or impact.

Be proactive in your thinking, not reactive. You have four options:

1.  Terminate the risk by ceasing the activity.

2.  Transfer the risk onto another party.

3.  Treat the risk, with the appropriate strategy.

4.  Tolerate the risk, as you have built contingencies into your plan or you have identified a possible upside.

By adopting a more considered approach to risks and potential problems we can alter the future exposure. In examining the probability and seriousness we allow for more effective risk management in advance.

We want to make things happen, not let things happen, or worse…wonder what happened!

So it’s really simple. Have a risk adjusted strategy. Because, mark my words, if there is one certainty in today’s most uncertain world, it is that much, much more change is coming…

About the author

Campbell Graham is a Principal at The Gap Partnership with deep experience across FMCG, retail, healthcare, media and hospitality. Since joining the business in 2014, he has built strong C-level partnerships across Africa and now works with international clients from the UK office, advising on negotiation strategy, consulting and capability development.

How The Gap Partnership can help you

The Gap Partnership specializes in transforming negotiation into a strategic advantage. With our expertise, we equip your teams with the skills and mindset to negotiate effectively, help standardize your negotiation processes for consistent success, and work with your leadership to foster a culture of collaboration and alignment across departments. Let us partner with you to embed negotiation into your organizational DNA, ensuring sustainable growth and a competitive edge in every negotiation.