RAG reviews provide you with a risk-based assessment of your business agreements and other documentation. These can be draft contracts that you have prepared, or have been prepared by a third party.
What is a RAG review?
The acronym RAG stands for Red, Amber and Green and is a scale of risk. A RAG review uses this scale to categorise notable points and issues identified in a review of a document:
- Red risk level indicates that a provision is a high and unacceptable risk.
- Amber risk level indicates that a provision is a moderate or commercial risk that is negotiable or requires a commercial decision.
- Green risk level indicates that a provision is a low or acceptable risk.
What points or issues will a RAG review identify?
This will depend on the document or contract that is the subject of the RAG review. However, the review may identify:
- Where the document does not align with the expectations of the parties (e.g. if a contract, it does not do what the parties think).
- Prohibited and particularly onerous contractual terms.
- Unreasonable exclusions or limitations of liability, or (conversely) unlimited liability.
- Incorrect assignment or licensing of intellectual property rights.
- Insufficient contractual protections in the form of warranties and / or indemnities.
- Where terms apply to customers that are consumers, non-compliance with consumer protection legislation.
What are the benefits of opting for a RAG review structure?
There are several advantages:
- Ease of use – RAG reviews are structured to be easy to use. Both through colour coding and a tabulated format, commercial operations and decision-making teams may be more familiar with the structure than contractual documentation containing extensive legal jargon.
- Expedited risk management – A RAG review allows decision makers to understand quickly the risk profile of a document and make informed decisions on how to proceed. A RAG review will not typically detail legal minutiae or minor drafting problems, rather key areas of risk. The format therefore lends itself to quick decisions, negotiation of issues and resolution of the same.
- Potential to mitigate legal costs – If deployed correctly, and subject always to the willingness of any third parties, a RAG review can avoid lengthy contractual review and negotiation processes. RAG reviews are, by their nature, less time-consuming than contract mark-ups, and enable the identification of key issues quickly. If a document contains too many red risk level clauses, the parties can negotiate and agree on identified issues from the outset rather than try to resolve these issues through a ping-pong of document mark-ups.
When is a RAG review appropriate?
We typically recommend that RAG reviews are deployed at an early stage in negotiations or for use by in-house legal teams. A RAG review may not be appropriate, or welcomed by third parties, in late stage negotiations where a more finessed approach is required.
The Intellectual Property, Data Protection and Technology team and the Commercial team at Stephens Scown LLP have vast experience utilising the RAG review format.
If you wish to discuss this further please contact James Gill, Solicitor in our Intellectual Property, Data Protection and Technology team or call us on 0345 540 5558.