Meeting your payment and delivery obligations doesn’t mean you’re in the clear. Many agreements, such as prime brokerage, term commitments, derivative agreements and fund administration agreements contain provisions that allow banks and vendors to terminate the relationship—or trigger other adverse consequences—based on specific events, even when day-to-day performance seems intact.
For investment firms, monitoring these types of defaults and termination events is just as critical as tracking payment and delivery obligations. Below are common event-driven triggers that may appear in your agreements.
1. Net Asset Value (NAV) Triggers
NAV decline provisions are typically tied to specific performance and reduction of assets under management thresholds. These triggers can become relevant even in the absence of operational breaches.
2. Key Person Events
These provisions are activated when a designated individual or team is no longer involved in managing the investment or account.
3. Investment Mandate Deviations
Even minor drifts from the agreed investment strategy or asset class can constitute a trigger under investment mandate-related provisions.
Understanding the Ramifications of a Triggered Event
When one of these events occurs, the consequences can be both contractual and non-contractual—and they often extend well beyond termination alone.
Contractual consequences may include:
- Liquidation of positions (at default-based or mid-market terms)
- Immediate termination of services
- Cross-acceleration of obligations or termination under multiple agreements with that party
- Triggering of cross-default provisions with third parties
- Additional margin or collateral requirements
- Increase in pricing of the services
- Suspension or loss of access to key products or services
Non-contractual consequences can include:
- Negative capital flows or investor redemptions
- Operational disruption and internal resource strain
- Imposition of unplanned legal, compliance, or advisory costs
- Reputational damage within the market or investor base
- Regulatory reporting obligations
- In extreme cases, a path toward insolvency or restructuring
Managing Termination Events at Scale
Tracking these event-driven triggers can be challenging. These provisions may be buried across multiple agreements, annexes, and schedules across multiple third-party providers of products and services. A consistent, scalable framework is essential to manage this complexity.
Three challenges often arise:
1. Decentralized Provisions
These events may be documented inconsistently across master agreements, statements of work, purchase orders, and trade confirmations—making it difficult to build a complete picture of risk.
2. Complexity of Interpretation
Trigger language is rarely simple. Analyzing thresholds, qualifiers, and definitions takes time, and manual review introduces the risk of delay and oversight.
3. Developing an Action Plan
Knowing where the risks lie is only part of the equation. Internal coordination is needed to develop response procedures, escalate concerns, and ensure periodic review of both contractual terms and operational readiness.
Where QDS Can Help
QDS is designed to help investment managers and financial institutions surface and manage event-driven termination provisions at scale. By using AI to tag and centralize these clauses across your bank and vendor agreements, QDS provides immediate visibility into which events matter—and what they mean for your business.
But identification is just the first step. QDS goes further by enabling automated workflows that turn these critical provisions into active risk management tools. Terms and thresholds can be linked to autogenerated tasks, deadlines, and reminders so your team receives timely alerts when a review is due, a trigger is nearing, or a key person change requires escalation.
With QDS, you not only reduce manual review time and ensure consistency across agreements—you stay ahead of emerging risks with proactive, system-driven monitoring.
Want to see how QDS can help your team track and manage your contracts including default and termination events more effectively? Schedule a demo today.