Every conglomerate in the world has a large legal team working perennially to safeguard the interests of the organization. Conglomerates have to deal with myriad legal issues, from government interference to public relations disasters, consumer affairs to lawsuits galore if there is a misstep. Then there are intra-company issues to handle. Just as these multinational brands take a proactive approach to safeguard their investments, business interests, returns and also their assets, be it infrastructural or manpower, companies should factor in the need to plan margin recovery before it is too late.
Margin recovery should not be an afterthought. Companies that work on margin recovery simultaneously as they work on contingency or redundancy plans, parallel to their initial agreement drafting phase which runs along with negotiations and the closing phases of a deal. As a matter of fact, margin recovery should be considered an integral part of a contingency plan. Many companies wonder if having an agreement in place is enough to avoid or resolve disputes. There are always legal repercussions, implied differences and loopholes that would pave the way for disputes. The disputes may or may not stand eventually when legal recourses are embarked upon but why get embroiled in such long drawn, painstaking and expensive processes in the first place.
Margin recovery has a tendency of getting very complicated. The initial audit and assessment is not the problem but the follow up, the reconciliation of both parties, pragmatic assessment of disputes when one or both parties don’t want to take a rational approach and many other issues make matters worse. If margin recovery is a proactive measure, then the approach right from the drafting phase will account for a legal framework or give some room to deal with such disputes, in the short term or long term.
Margin recovery may be necessary while the association is still ongoing or it could be imperative afterward. In either scenario, margin recovery should not be a reactive step. It can be a response when disputes arise and you can always hire a margin recovery expert without having any proactive system or practice in place. However, the ideal way to go about it is to be safe than sorry.
Think of margin recovery as the safeguarding nondisclosure agreement or the legal disclaimers and bestowing accountability on those who are responsible to shield yourself from possible linkages to legal hassles. Margin recovery is a cure but can also be the prevention.