In a tech-centric world where your favorite food ordering app can share when food will be delivered with precise location-based tracking, why can’t large companies keep track of the status of their contract, including critical obligations and renewals?
The solution to the above-stated issue is Contract visibility which gives the ability for companies to instantly locate, retrieve, analyze and track contracts across the enterprise.
The U.S. National Association for Purchasing Managers assessed that “the average Fortune 1000 company has between 20,000 and 40,000 active contracts.” With so many active contracts in play, it is simply not humanly possible to manage this volume without good systems and procedures. These contracts cannot be searched as we search on Google, and the data within contracts cannot be extracted to track expiries, renewals, and obligations. This leads to the rise of contract risks. Discounts and rebates are overlooked, and unwanted renewals happen on autopilot.
Is there a better way to manage contractual risks?
Enterprise-wide contract management software helps companies to digitize these contracts and store them in a central, cloud-based repository. As the contracts are digitized, important information like obligations, pricing, rebate information, and contract expiries can be automatically extracted and tracked for 360-degree visibility.
As per Gartner Market Guide 2020 for Contract Lifecycle Management, “Contract Lifecycle Management(CLM) appeals to companies of all sizes in all industries. Organizations without CLM struggle to manage their contracts effectively. The risks associated with poor contract management include overlooked penalties, lost revenue, damaged brands, and savings. Understanding and automating CLM can also limit an organization’s liability and increase its compliance with legal requirements.”
After the COVID-19 crisis, all global firms are reassessing their risk in the New Normal.
What Are Your Business Risks?
Risks are very hard to find. Risks might be in the nature of your business or how your suppliers are sourcing for the business. Risk exists in terms of the environment, whether it is a regulatory or a legal perspective. The environment in which we operate today is even more complicated than before. Among these, the scariest one who keeps all of us up is the risk associated with the unknown. So when you are assessing business risks, it is important to capture their severity and probability.
Interestingly it might be already mentioned in your contract or what is missing from your contracts.
There is a risk in how people fulfill the obligation concerning the contract.
As per the KPMG’s technology risk management survey, it is stated that: “72% of global enterprises have risk teams into a project once the technology risk issues have appeared and 47% adopt technologies like mobile apps and devices without even understanding and knowing the risk associated with it.”
4 Steps To Tackle Business Risks with Contract Obligation Management Solutions:
The technology which exists today is for automation and making things faster. But while discussing technology -certain attributes help to support risk management. So looking at this from the lens of contract management, the first step to manage risk is :
Using the CLM system, you can see past golden contracts for similar use cases and use them as a base to renegotiate with vendors to get a better deal and rewards.
- Capture & Tag Data: It focuses on identifying legal text and aligning with specific business terminologies and data points. Helping to safeguard your business by tagging terms and information based on the specific documents like SLAs, Clauses, Policies, and Government Laws.
- The next step is where your planning gets into action: Triage & Inventory Risks – What risks are important to you and its severity in your business. Inventory of risk, and how can it be changed? Contract management solutions help to plan your business execution strategy.
- But the most powerful is when the technology is right, it enters the next stage of Discovery and Insight. The key feature of Contract Lifecycle Management is to identify and discover risks proactively while you are drafting your contracts. You get predictive insights to identify where the risk is coming from or suggest where that risk needs to be addressed or suggest the language to avoid a certain risk.
- All of these risks require proper action. Quality Data Management gives you the ability to act. Everything in contract management is not related to the repository. It is about incorporating all of these features into giving the best possible combination to combat risk. Certain repositories store executed contracts as regular files but they lack few capabilities for tracking, process management, speed, or intelligence. CLM sends helpful reminders and alerts for key dates and milestones, intelligently routes contracts based on attributes and roles, and brings contracts into collaboration tools, and easy search and analysis.
Start Managing Business Risk using ServiceNow + Aavenir Contractflow
ServiceNow is a Leader in Integrated Risk Management as per Gartner Magic Quadrant for Integrated Risk Management. ServiceNow® GRC has a Risk Management application that provides ways to:
- Arrange categories of risks to normalize risk scores within the organization
- Consistently assess risks using a best practice workflow
- Understand and report on the financial and statistical impact of risk to the organization
Why Enterprise need Contract Management App on ServiceNow ?
Managing contracts is a complex activity. It has been estimated that inefficient contracting causes firms to lose up to 40% of the fiscal value on a given deal. To mitigate risk, Contract Management Solution has clauses in contracts that define milestones and deliverables with dates and quantities. Following these persistently is a troublesome activity; Especially when you have thousands of contracts across enterprise departments. However, a solid Contract Lifecycle Management software can be your guardian angel in such a manner. Contracting is a collaborative process. Lack of coordination can skip basic elements that could enable better vendor performance and cost savings.
Despite natural consequences or any pandemic like corona or individuals leaving the enterprise, the show must go on. Contract Management Solutions are helping global enterprises to manage business relationships and reduce risks.
CLM solutions like Aavenir Contractflow manages contract templates, terms & clauses templates, and legal playbooks in a full-text searchable centralized repository on ServiceNow – making it easy to access; standardizing legal language across enterprise departments and geographies; and, reducing time to author contract. Take a Leap to the Future of Work with AI-powered Contract Management on ServiceNow.
In the end, I would like to give credit to Lauryn Haake, Founder and President, Qualitas Consulting Group & Edward Chick, CLM ServiceNow Practice Lead, Mainspring for sharing their insight and views on our on-demand webinar: