Risk Scanner Sample
Sample AnalysisIdentify and quantify contractual risks including liability exposure, compliance gaps, unfavorable terms, and vendor lock-in. This sample demonstrates comprehensive risk assessment with severity scoring and mitigation recommendations.
MEDIUM RISK
4
Critical Risks
3
Medium Risks
2
Low Risks
Category: Pricing & Fees
What the Contract Says
"TechVendor may adjust pricing at each renewal period by providing Customer with sixty (60) days' written notice prior to the renewal date. Pricing adjustments shall reflect market conditions, cost of service delivery, and platform enhancements.""
Why This Is Risky
- Unlimited Exposure: No maximum cap on annual price increases. Vendor can raise prices by any percentage with only 60-day notice.
- Market Context: Industry data shows SaaS vendors averaging 8-12% annual increases when contracts lack price caps. Some vendors have implemented 20%+ increases citing "platform enhancements."
- Budget Unpredictability: Without a cap, multi-year budget planning becomes unreliable. Finance teams cannot accurately forecast spend.
- Renewal Leverage: Vendor knows you have limited time (60 days) to evaluate alternatives, negotiate, or migrate if price increase is excessive.
Potential Exposure
Financial Impact: $23,550 over 3 years (conservative estimate)
Calculation:
- Year 1 (current): $78,500
- Year 2 (10% increase): $86,350 (+$7,850)
- Year 3 (10% increase): $94,985 (+$8,635)
- 3-Year Total: $259,835 vs. $235,500 with 5% cap = $24,335 excess
Worst-Case Scenario: If vendor implements 15% annual increases (not uncommon in "high growth" SaaS): 3-year exposure climbs to $48,000+ over capped increases.
Recommended ActionPriority: Must Have
Negotiation Priority: š“ Must Have
Suggested Approach: "We need predictability for budget planning. Industry standard for enterprise agreements includes price increase caps tied to CPI or a fixed percentage. We propose capping annual increases at 5% or CPI, whichever is lower. This protects both parties from market volatility while allowing reasonable cost adjustments."
Supporting Data:
- Current CPI: 3.4% (as of Dec 2024)
- Proposed 5% cap is above inflation, demonstrating fairness
- 70% of enterprise SaaS contracts include price caps per Gartner research
Fallback Position: "If 5% is not acceptable, we can agree to 7% cap with a provision that increases above 5% require documented justification of platform enhancements or increased service costs."
Category: Auto-Renewal
What the Contract Says
"This Agreement shall automatically renew for successive one (1) year periods unless either party provides written notice of non-renewal at least sixty (60) days prior to the end of the then-current term. Failure to provide timely notice shall result in automatic renewal under the then-current pricing and terms.""
Why This Is Risky
- Tight Timeline: 60-day notice period is at the low end of market standard (60-90 days). Combined with vendor's ability to announce price increases 60 days out, you could receive renewal quote and notice deadline simultaneously.
- Calendar Trap: Renewal date (April 15) requires notice by Feb 14. This falls during Q1 close for most companies when procurement teams are overwhelmed. Easy to miss.
- Limited Negotiation Window: Even if you remember to provide notice, 60 days is insufficient time to:
- Conduct vendor evaluation
- Run RFP for alternatives (typically 90-120 days)
- Negotiate improved terms
- Plan data migration if switching vendors
- Compounding Risk: Auto-renewal at "then-current pricing" means if vendor sends 15% increase notice 60 days out and you miss non-renewal deadline, you're locked in at higher rate.
Potential Exposure
Financial Impact: $78,500 + potential 10-15% price increase
Calculation: If renewal is missed and vendor implements 12% increase: $78,500 ā $87,920 Locked-in premium: $9,420 for one year you didn't plan for
Worst-Case Scenario: Unwanted automatic renewal at significantly increased rate with no exit option for 12 months. Based on current spend, could represent $10,000-$15,000 of unbudgeted spend.
Recommended ActionPriority: Must Have
Negotiation Priority: š“ Must Have
Suggested Approach: "We request extending the non-renewal notice period to 90 days to align with industry best practices and allow adequate time for vendor evaluation and budget planning. Additionally, we propose that any price increases announced within 90 days of renewal give us a 30-day opt-out window post-renewal."
Why This Benefits Vendor: "A 90-day window actually benefits you by giving us more time to confirm renewal, reducing last-minute scrambles and relationship stress."
Fallback Position: "If 90 days is not possible, we need at minimum a contractual commitment that price increase notices will be provided 90 days before renewal (30 days earlier than renewal notice deadline), giving us time to make informed decisions."
Category: Termination
What the Contract Says
"Either party may terminate this Agreement for material breach if the breaching party fails to cure such breach within thirty (30) days of written notice. Customer may not terminate this Agreement for any reason other than Vendor's material breach or insolvency.""
Why This Is Risky
You are locked into the contract with no mid-term exit option except for vendor breach. This creates several risks:
- Vendor Performance Degradation: If service quality declines but doesn't rise to "material breach," you have no recourse except to wait for contract end.
- Business Change: If your business needs change (acquisition, pivot, downsizing), you cannot exit early even with willingness to pay reasonable termination fee.
- Technology Obsolescence: If better alternatives emerge or vendor falls behind technologically, you're stuck until contract end.
- Relationship Deterioration: If vendor relationship becomes untenable (account management issues, support degradation, strategic misalignment), no exit path exists.
Industry Context:
- 65% of enterprise SaaS contracts include TFC provisions (Gartner 2024)
- Standard structure: TFC allowed after Year 1 with 90-day notice + 20-25% buyout of remaining fees
- SaaS vendors increasingly accept TFC as it incentivizes better service delivery
Potential Exposure
Full contract value ($78,500) with no exit option if circumstances change. In worst case (immediate need to exit), you pay full year while also paying for replacement solution.
Example Scenario: Company acquired in Month 3 of contract year. Acquirer has enterprise agreement with competitor. You're forced to pay $78,500 for unused TechVendor platform while also paying for acquirer's incumbent solution.
Recommended ActionPriority: Must Have
Negotiation Priority: š“ Must Have
Suggested Approach: "We need operational flexibility to terminate mid-contract if business circumstances change. We propose adding Termination for Convenience starting after Month 12, with 90-day written notice and a buyout equal to 25% of remaining contract value. This protects your revenue while giving us appropriate flexibility."
Calculation Example: If TFC exercised in Month 18 of 24-month term:
- Remaining contract value: 6 months Ć $6,542 = $39,250
- 25% buyout: $9,812
- Customer total cost: $9,812 (vs. $39,250 if locked in)
- Vendor receives: $9,812 (vs. $0 if customer struggles through and doesn't renew)
Fallback Position: "If buyout concerns exist, we can agree to declining buyout schedule:
- Months 13-18: 30% of remaining
- Months 19-24: 20% of remaining
- Thereafter: 10% of remaining"
Category: Service Levels
What the Contract Says
"TechVendor will use commercially reasonable efforts to maintain platform availability. Scheduled maintenance windows will be communicated with reasonable advance notice. TechVendor is not liable for service interruptions due to circumstances beyond its reasonable control.""
Why This Is Risky
- No Commitment: "Commercially reasonable efforts" is not an SLA. Vendor has made zero contractual commitment to uptime percentage.
- No Consequences: Without service credits, vendor has no financial incentive to maintain high availability. You pay 100% regardless of platform performance.
- No Recourse: If platform experiences frequent outages impacting your business, you cannot claim credits or compensation. Only option is termination for material breach (high bar to prove).
- Unclear Maintenance: "Reasonable advance notice" could mean 24 hours or 2 hours. No defined maintenance windows or duration caps.
Industry Standards:
- Standard enterprise SaaS: 99.5%-99.9% uptime SLA
- Typical credit structure: 10% monthly credit for <99.5%, 25% for <99%, 50% for <98%
- Scheduled maintenance: Max 4 hours/month with 7-day advance notice
Business Impact: At $78,500/year ($6,542/month), platform downtime directly impacts your operations:
- 1% downtime = 7.2 hours/month unavailable
- If your team uses platform 160 hours/month, that's 4.5% productivity loss
- At average loaded cost of $75/hour Ć 20 users = $10,800/month in productivity
- 1% downtime costs you $486/month in lost productivity with zero compensation
Potential Exposure
If platform maintains 97% uptime (2.5% downtime):
- Your productivity loss: $1,215/month
- Vendor penalty: $0
- Annual impact: $14,580 in lost productivity while paying full $78,500
Recommended ActionPriority: Must Have
Negotiation Priority: š“ Must Have
Suggested Approach: "We need contractual SLA commitments to ensure service reliability. We propose:
- 99.5% monthly uptime guarantee (excluding scheduled maintenance)
- Scheduled maintenance: Max 4 hours/month with 7-day advance notice
- Service credits: 10% monthly fee for <99.5%, 25% for <99%, 50% for <98%
- Monthly measurement period with automatic credit application"
Why Vendor Should Accept: "Our research shows your platform consistently exceeds 99.5% uptime. Formalizing this costs you nothing while demonstrating commitment to service quality. Industry standard credits align with market norms."
Fallback Position: "If tiered credits are not acceptable, we can agree to single-tier 10% credit for <99.5% uptime, with quarterly measurement instead of monthly."
Category: Pricing & Fees
What the Contract Says
"Base subscription includes 500GB of data storage. Additional storage is billed at $0.15 per GB per month. Customer is responsible for monitoring storage usage. TechVendor will notify Customer when storage exceeds 90% of included allocation.""
Why This Is Risky
- Uncapped Liability: No maximum on storage overages. If data grows faster than expected, costs can escalate quickly.
- Notification Gap: Vendor only notifies at 90% capacity. By the time you receive notice and take action, you may have already exceeded allocation significantly.
- Rate Concern: $0.15/GB/month ($1.80/GB/year) is above market rate for cloud storage (AWS S3 standard: ~$0.023/GB/month for similar tiers).
- Retroactive Billing: Overage charges apply immediately. No grace period to optimize storage or compress data.
Example Scenario: Your data grows from 450GB to 850GB over 6 months due to increased analytics workload:
- Month 1: 500GB (no overage)
- Month 2: 580GB ā 80GB Ć $0.15 = $12 overage
- Month 3: 650GB ā 150GB Ć $0.15 = $22.50
- Month 4: 720GB ā 220GB Ć $0.15 = $33
- Month 5: 780GB ā 280GB Ć $0.15 = $42
- Month 6: 850GB ā 350GB Ć $0.15 = $52.50
- 6-Month Total: $162 in unbudgeted storage fees
Annualized at 850GB sustained: 350GB Ć $0.15 Ć 12 = $630/year ongoing
Potential Exposure
Conservative estimate: $600-$1,200 annually in storage overages based on typical analytics platform data growth (25-40% year-over-year).
Recommended ActionPriority: Should Have
Negotiation Priority: š” Should Have
Suggested Approach: "We need cost predictability for data storage. We propose:
- Increase included storage to 1TB (aligns with competitor offerings)
- Cap storage overages at $1,500/year
- Reduce per-GB rate to $0.10/GB/month (market-competitive)
- 30-day grace period when exceeding allocation before charges apply"
Market Data:
- Competitor A includes 2TB storage in base tier
- Competitor B charges $0.08/GB/month for overages
- Industry standard: 14-30 day grace period for storage optimization
Fallback Position: "If storage increase is not possible, we request monthly storage usage reports and 14-day advance notice before overage billing begins, allowing us to optimize data or purchase additional blocks."
Category: Data & Compliance
What the Contract Says
"Customer retains ownership of Customer Data uploaded to the Platform. TechVendor retains ownership of all analytics models, algorithms, aggregated insights, and platform improvements derived from Customer Data. Upon termination, TechVendor will provide Customer Data export in CSV format within thirty (30) days of written request.""
Why This Is Risky
- Derivative Works: Vendor claims ownership of "aggregated insights" and "platform improvements" derived from your data. This could include valuable analytics models you helped train.
- Limited Export Format: CSV only. No JSON, API export, or direct database access. CSV export of large datasets is cumbersome and may lose data fidelity (formatting, relationships, metadata).
- 30-Day Window: Only 30 days post-termination to export data. Insufficient time if dataset is large (multi-TB) or requires validation before deletion.
- No Real-Time Access: Must submit written request. No self-service export during contract term for backup/DR purposes.
Business Risk: If you terminate or don't renew:
- Cannot take analytics models you helped develop to new platform
- CSV export may require extensive reformatting for new system
- Tight 30-day window creates migration stress and potential data loss risk
- Vendor retains insights derived from your proprietary data
Industry Comparison:
- Best practice: Customer owns all derivative works created from their data
- Standard export: Multiple formats (CSV, JSON, Parquet) + API access
- Data portability window: 60-90 days minimum, often with self-service option
Potential Exposure
Not monetary but strategic. Loss of analytics IP you helped create, plus migration friction if switching vendors.
Recommended ActionPriority: Should Have
Negotiation Priority: š” Should Have
Suggested Approach: "We need stronger data portability protections:
- Confirm Customer owns all derivative works created from Customer Data
- Add JSON and API export options in addition to CSV
- Extend data export window to 60 days post-termination
- Allow self-service data export anytime during contract term for backup purposes"
Why It Matters: "Data portability is critical for our business continuity planning. We need assurance we can migrate smoothly if needed and that analytics insights we helped develop remain our property."
Fallback Position: "At minimum, extend export window to 60 days and add JSON format. We can defer derivative works ownership discussion if needed."
Category: Pricing & Fees
What the Contract Says
"Customer's actual user count and usage metrics will be reconciled quarterly based on peak concurrent users and maximum storage utilization during the measurement period. Any additional usage beyond committed amounts will be billed retroactively at the then-current per-unit rate within thirty (30) days of reconciliation.""
Why This Is Risky
- Quarterly Surprises: Every 3 months, you may receive unexpected invoice for retroactive usage above commitment.
- Peak-Based: Billing based on single highest usage moment in 90 days, not average. One spike drives full quarter billing.
- No Advance Warning: Discovery happens at reconciliation. No mid-quarter alerts when approaching overages.
- Budget Impact: Retroactive charges appear as unbudgeted expenses in quarter they're billed, potentially causing budget variances.
Example Scenario: Base commitment: 75 users, 500GB storage
Quarter 2 Actual Usage:
- User count: Typically 75, but hit 92 during product launch (Week 8)
- Storage: Averaged 520GB, peaked at 680GB (Month 3)
True-up calculation:
- Users: (92 - 75) Ć $350/user/quarter = $5,950
- Storage: (680 - 500) Ć $0.15/GB Ć 3 months = $81
- Q2 True-Up Invoice: $6,031 unexpected charge
Annualized if pattern continues: ~$24,000 in annual true-up charges beyond base $78,500.
Potential Exposure
Conservative: $8,000-$12,000 annually in true-up charges if usage trends 15-20% above committed levels.
Recommended ActionPriority: Should Have
Negotiation Priority: š” Should Have
Suggested Approach: "We need more predictable billing and better usage visibility:
- Change from peak-based to average-based true-up (use 90-day average, not peak)
- Implement automated monthly usage reports with overage alerts
- Allow 10% tolerance before true-up charges apply (grace buffer)
- Provide 30-day advance notice before retroactive billing"
Why This Is Fair: "Peak-based billing penalizes us for temporary spikes (launches, seasonal workloads) rather than sustained usage. Average-based billing better reflects actual platform cost to you."
Fallback Position: "If peak-based billing must remain, we request:
- Monthly usage visibility dashboard (not quarterly surprise)
- 15% overage tolerance before charges apply
- True-up billing at month-end of measurement period, not 30 days later"
Category: Service Levels
What the Contract Says
"TechVendor will provide email and chat support during business hours (9am-6pm ET, Monday-Friday excluding holidays). Support response times will align with industry standards for the applicable service tier.""
Why This Is Risky
"Industry standards" is vague and not enforceable. No defined response times for critical issues.
Potential Exposure
Low financial impact but could cause operational delays if critical support needed outside business hours.
Recommended Action
Request defined SLAs: P1 (1 hour), P2 (4 hours), P3 (1 business day)
Category: Contract Terms
What the Contract Says
"TechVendor may modify this Agreement or Service Terms by providing Customer with thirty (30) days' written notice. Continued use of the Platform after notice period constitutes acceptance of modified terms.""
Why This Is Risky
Vendor can change terms mid-contract with only 30 days' notice. "Continued use = acceptance" is problematic if you can't easily migrate.
Potential Exposure
Low immediate risk, but vendor could introduce unfavorable terms (new fees, reduced service levels) mid-contract.
Recommended Action
Negotiate that material changes require mutual written agreement, not unilateral modification. Or at minimum, material changes trigger TFC right.
This is an automated risk assessment tool. Not legal advice. Consult qualified legal counsel for contract interpretation and negotiation strategy.
Generated by: AllCaps Contract Intelligence Platform
Date: 2025-01-02
Analysis ID: RA-2025-00847
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