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									executive memo                                                                                             Contract Management

First Call All the Lawyers
        s the fallout from the financial crisis spreads, many             the supplier could tap into to buy raw

A       companies are realizing that they’re ill-prepared for
        potential disruptions in their supply chains. In fact, a recent
survey by UPS and the Economist Intelligence Unit found that
                                                                          materials to produce the goods that the
                                                                          clients needed. “As the supplier needed
                                                                          to purchase the supplies necessary to
just 16 percent of senior executives believe their companies pay          perform under the contract, it would
sufficient attention to risk mitigation in their supply chains.           submit the invoices to the escrow agent,
   Erika Schenk spends much of her time helping companies avoid           the client would get notice of that and a
these disruptions. Schenk, a contract law attorney at international       copy of the invoice, and the client had
law firm Bryan Cave, works with clients to avoid the “contract            to approve the payment in order for it
                                  meltdowns” that can occur when a        to go through,” Schenk explains.
                                  buying organization or a supplier          Other examples of precautions that
                                  is unable to meet its obligations       can be built into contracts: Include a security interest in goods
                                  under a contract.                       being sold to a customer, so if the customer doesn’t pay, you can
                                     For supply chain executives          reclaim the goods. Segregate goods and indicate on them that
                                  dealing with suppliers that are         they belong to you, so if a supplier goes under and a creditor
                                  not in compliance, the first            comes to seize assets, they’ll know those assets don’t belong to
                                  question that must be posed is,         the supplier and are not subject to seizure.
                                  Do we want to continue with this           Or, run publicly available lien searches on a supplier to see
                                  relationship? You must decide if        how many and what kind of liens are against their company –
                                  this is a strategic supplier, one       lots of liens could mean the supplier’s got a lot of debt. That
                                  that is critical to meeting business    gives you a better understanding of what their risk exposure is
                                  goals. If so, can you bring the         and whether you want to do business with that company. It also
                                  supplier to the table to salvage        can help you see wh
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