Mitigating Third-Party Risk in Technology Contracts: Assignments, Audits, Termination, Indemnification, Compliance

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Tuesday, April 5, 2022

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Course Materials

This CLE webinar will guide counsel in which contract clauses in vendor agreements to consider in order to mitigate third-party risks. The panel will discuss the provisions regarding parties' rights and responsibilities, performance standards, contract value, and other key issues related to risk management.

Description

In the contracting process, after completing due diligence of a potential vendor, the agreement should be structured in accordance with the scope and nature of that third-party relationship. Even though some specific transaction-based terms and the comprehensiveness of a contract will be designed to reflect the unique dynamics of each relationship, there are some essential clauses that should be included in every vendor agreement to minimize risks.

Compliance with applicable laws and regulations are the backbone of third-party relationships and should be a cornerstone of the vendor agreement. A compliance clause is where counsel can illustrate a company's commitment to its business ethics and compliance program, how the client considers compliance in every new business operation, and the expectations for a third party's compliance.

Counsel will need to include appropriate confidentiality provisions and consider requirements related to privacy and data security based upon the nature of the data and applicable industry involved.

A vendor agreement should include provisions related to the performance of the applicable service or product. A clause regarding a third party's responsibility to file periodic and on-demand reports is also required, including how often and to what extent these reports are prepared. Periodic reports should represent a third party's performance levels, and its compliance with undertaken service standards, as well as its financial statements, and any pending claims. Likewise, termination clauses are essential to provide a client with a mechanism to address changes in risk over time, or the risk-reward balance becomes reversed, and a relationship is no longer in the client's best interests. Not only should termination clauses state the circumstances that give the right to terminate, but also how termination is effective and specifics on termination assistance. The contract should also address the third party's ability to assign its responsibilities to an entity that has not been vetted or assessed.

Indemnification clauses provide the right to hold a third party responsible for the damages, losses, and claims that arise from its failure to fulfill its contractual obligations or resulting from other conduct of the third party. In addition, appropriate audit provisions are necessary to allow a company to confirm a third party is meeting its commitments.

Listen as our expert panel discusses how third-party risk management via contract drafting and negotiations can provide clients with the necessary information about business partners to help identify and mitigate risks. The panel will address the most effective and beneficial ways of implementing a risk management plan.

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Outline

  1. Vendor agreements
    1. Third-party risks
      1. Compliance with laws
      2. Confidentiality, privacy, and data security
      3. Performance and reporting
      4. Audits
      5. Termination
      6. Indemnification
      7. Assignment and change in control
  2. Best practices

Benefits

The panel will address these and other key issues:

  • What is the best practice to assess and manage risk via the contract when dealing with a third party?
  • What should the indemnification clause include in anticipation of third-party liabilities?
  • How will compliance be addressed in the vendor contract and what is the expectation of a vendor?
  • What other considerations should counsel address in a vendor agreement to mitigate risks?

Faculty

Farmer, Shanin
Shanin Farmer

Special Counsel
Kelley Drye & Warren

Ms. Farmer’s practice focuses on board governance, mergers and acquisitions, SEC compliance, contract management,...  |  Read More

Gomez, Carlos
Carlos Gomez

Contract Compliance Services Manager, Audit
PKF Texas

Mr. Gomez has extensive experience performing and managing contract compliance audits in various industries. He has...  |  Read More

Ryan, W. Michael
W. Michael Ryan

Partner; Chair Technology Transactions and Sourcing Practice
Kelley Drye & Warren

Mr. Ryan focuses his practice on a variety of complex transactional matters in the technology and business process...  |  Read More

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