Vendor Contracts: Let’s Talk About Force Majeure One More Time

by drjim on August 4, 2008

Shell Oil had to declare a force majeure - are you ready if your vendors do the same?

Shell Oil had to declare a force majeure – are you ready if your vendors do the same?

We had talked about force majeure awhile back, and apparently it was interesting enough to catch the attention of one of my colleagues. Phil is a hard-charging product manager who works in the telecommunications space and he just sent me an email that was talking about another story where a vendor had to declare force majeure:

Jim,
Shortly after I read your posting on force majeure I saw an article that said that Royal Dutch Shell has just announced that they won’t be able to meet a big piece of their Nigerian oil-export obligations for their customer for the next two months because of militant attacks on their facilities. The force majeure legally protects Shell from not meeting contractual obligations because of factors outside of its control. So much for gas prices going down anytime soon!

Phil
Senior Product Manager

During our last discussion, we spent some time making sure everyone understood what force majeure was. This time around, we should probably discuss what you need to do as a product manager if one of your vendors declares a force majeure!

This is just the tip of the business continuity planning iceberg. As product managers we are responsible for the success of our products no matter if they are just being rolled out or if they are already currently available . The wrong time to worry about the loss of a critical vendor is after something has happened. The right time is when you are introducing your product. There are three questions that you need to both ask and answer:

  1. What Are All Of The Things That Could Possibly Happen: This requires a big blank sheet of paper and some serious brainstorming. Generally things fall into categories such as natural disasters, political unrest, pandemics, etc.
  2. What Are The Things That Probably Might Happen: You can’t plan for every possibility (your budget is not that big!). So instead you need to identify the top possibilities on your list of all things. How long your probable lists is depends on your budget and your available time.
  3. Plan, Plan, Plan: You don’t need separate plans for earthquakes, floods, fires, etc. Instead, you need just one plan with a few special case steps. Putting this together BEFORE you need it is the key to being a product manager who is always on top of things.

Once you have a plan, you might think that you are all done. As my friend Phil says “… a plan is just the start of the real work…” He’s correct: a plan starts to go out-of-date once it’s been created. You need to revisit it at least twice a year and make sure that that names, contact info, and actions are still valid.

So are you ready for one of your vendors to declare a force majeure? Post a comment and let me know if your firm insists that you have a plan for how you will deal with these types of disasters or if you are flying without a plan…

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{ 2 comments… read them below or add one }

birdfluman August 5, 2008 at 8:15 am

Good article. We need to keep Bird Flu at the forefront of every business manager’s mind. It won’t go away so better start preparing.

Nigel Thomas
For free references and tools go to Bird Flu Manual Online or, if you need more comprehensive tutorials and templates, consider Bird Flu D-I-Y eManual for business preparedness and survival.

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Dr. Jim Anderson August 6, 2008 at 12:28 pm

Nigel makes a good point about trying to be ready for Bird Flu. However, (hopefully) none of us have ever experienced a disaster that didn’t affect our infrastructure (houses, buildings, etc.).

In order to get a handle on something so unfamiliar, perhaps starting by planning for how you would handle an extended power outage would get the ball rolling…

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