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Enron Mail |
Mark:
I am concerned about committing to the development of legal risk books using a VAR-like analysis since our attempts in this direction a couple of years ago failed (Bob Williams and I worked on that project). Many of the risks that were identifiable did not lend themselves to the numeric analysis so near to the commercial guys' hearts and the numbers we came up with were close to meaningless. If you want a technical example of a legal risk in our financial trading contracts, you could use either (i) the statute of frauds (deals of more than one year in length may be unenforceable if the confirm isn't signed) or (ii) the widespread use of multiple "Omnibus" short-form contracts for trades before a master agreement is executed (resulting in many transactions where netting in bankruptcy has not been tested in court). Item (i) could be fixed with legislation (as it has in New York). Item (ii) could be reduced if the traders/dealmakers were willing to put pressure on their customers to sign master agreements. I like the idea of emphasizing the need for buy-in from the commercial side in the contract negotiation/formation process. That buy-in needs to be at all levels and it will only happen with the line folks if they get it from the top. Mark T.
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