Contracts are the cornerstones of professional relationships. To know and understand the obligations that bind an organization to its partners, teams must be able to manage contracts and data holistically, through a unified solution. Forget your storage cabinets, switch to a contract management solution.
Contracts must be accessible by all your departments, whether it is Purchasing, HR, Sales, IT or Accounting. However, a holistic approach is needed to avoid risks that can threaten the organization as a whole. This is why contract management issues are becoming more important.
Contracts are essential to a company’s operations.
Consumers are becoming increasingly influential; suppliers play a more important role in the success of businesses; purchase and sale contracts are more often negotiated; downstream claims are growingly complex, and organizations must more than ever focus on compliance and regulatory requirements. Given this new reality, the adoption of a contract life cycle management solution seems unavoidable:
1. A large number of stakeholders involved in the contracts workflow
Today, employees, customers, suppliers, shareholders and investors are all involved in contractual processes. In this context, each participant must validate a part of the contract which can be difficult if you don’t have a unified platform to manage them. Users responsible for reviewing contracts don’t always have the time or expertise to assess and determine the overall business context and risk arising from certain contracts, as there is no integrated process.
2. Diversification of contract types and general conditions
From NDAs to MSAs or SLAs, the general terms and conditions of contracts can generate complex requirements to manage. It will sometimes be necessary to modify these requirements at the request of certain stakeholders in the organization who do not have access to the contract management system. These changes may affect all contracts, particularly when the company changes its name. Others will only concern certain areas of the company, for example with new regulations specific to a sector or region that will have an effect on some of your suppliers or customers. Without a centralized approach, it is impossible to know exactly which contracts will be subjected to modifications.
3. Regulatory requirements from different legal systems
With globalization, it is essential to be able to determine precisely the law applicable to the contract (national, supranational (EU), international (UN)). By having this information and being able to centralize the creation and management of contracts, companies can understand the context of any contract and their potential impact on the company, for example, in the case of linguistic differences between common law and civil law. In order to be able to properly draft contracts, it is necessary to know and understand these different legal proceedings.
4. Major events in the company’s life require increased legal supervision
During periods of change, such as mergers and acquisitions, major contract changes are required. Having a centralized contract management system with a library of clauses and customizable contract templates allows the legal department to quickly make the necessary corrections to nuances and legal language without having to review each contract one by one.
5. Increasing regulatory requirements
Risk and compliance management ( RCM) is on everyone’s lips. To be able to manage regulatory changes affecting contracts, companies need an overview and flexibility. Indeed, companies that are subject to strict regulatory requirements or that operate internationally must be able to manage their contracts dynamically. In addition, regulatory developments often vary from one legal system to another, with laws likely to have a significant impact on activities (Brexit, NAFTA, RGPD, etc.). In this context, organizations must pay particular attention to the drafting of contracts and ensure that they incorporate the necessary changes as regulations evolve.
6. Analytics, a vector of progress
Today, companies need to better understand their contracts. As Big Data grows in prominence, the information created or collected in contracts requires a centralized process to identify trends and nuances in all the organization’s contracts. Analytics applied to contract structures must also be based on contract life cycle management platforms capable of identifying the nuances required for analysis:
– Types of contracts, temporality of clauses, use of clauses
– Optimization of total cost through clause optimization (compensation, SLA, audits)
– Disputes arising from contractual clauses or analysis for managing obligations
– Contracts scope and monitoring of objectives/compensation
– Predictive trend analysis of clauses, suppliers and validation cycle levels
7. Cloud as the future of Data
For companies looking to adopt a Contract Management solution, Cloud is the solution of choice: it offers simplified scalability, better distribution and increased security, with standards such as SOC 2, HIPAA, SSAE 16 or ISAE 3402. Cloud contract management could allow companies to avoid risks more effectively, unlike On-Premise authorities. In addition, SaaS solution providers offer a multitude of significant technological advantages: accelerated profitability, impact of reduced upgrades, managed security, increased integration, improved scalability, etc.
If you still use hard disks, Excel tables and/or disparate sets of solutions to manage your contracts, look at what the software market can offer today, solutions such as the Sourcing Force Contract Management module exist. Ask for your free demo!