Most businesses have a mission statement that defines the organization’s purpose and motivation. When done well, a mission statement can be inspirational, exciting, and a primary driver of business goals. However, a critical and often overlooked component of achieving those goals is providing teams with the tools they need to manage the business’s operational needs.
Too often, businesses overlook the core critical functions of internal management, procurement, vendor agreements, and other contracting obligations. Legal departments are “hamstrung” when forced to use antiquated management tools in increasingly modern, commercial environments. Local storage for business-critical documents is unsafe and no longer meets standard compliance requirements. Companies should embrace modern cloud infrastructures and the myriad of benefits they provide.
Contracts are an essential part of achieving any business’s primary goals. Skimping on proper contract management could lead to some serious risks and unnecessary costs. Businesses run the risk of missing opportunities and neglecting optimizations for efficiency by not equipping internal legal teams with truly effective tools. Legal departments are commonly understaffed and often have competing commitments, which limit their ability to innovate. However, the need for a modern CLM is essential because poor contract management could mean the difference between surviving and thriving.
Modern Contract Lifecycle Management tools capitalize on advancements in Artificial Intelligence to enable legal teams with autonomous monitoring, enhanced audit features and ever-increasing methods of automation. These applications allow for secure, remote access to a centralized contract database that acts as an organization’s Single Source of Truth.
In working with members of both business and legal teams, we’ve compiled a short list of the five most common reasons organizations across industries are adopting modern CLMs.
1. Centralized Contract Management
Decentralized contracting occurs when contracts are entered into by different departments, and those contracts remain compartmentalized. When contracts are decentralized it becomes difficult to manage contractual obligations and risks.
Modern CLMs should provide a centralized platform to manage all contracts for a business. There are typically features to silo or cordon off employees to their respective departments. By using a centralized platform, legal teams can manage risk and control contract negotiations. This is a common issue that can be easily addressed.
2. Missed Deadlines
Missed opportunities are the biggest symptom of missing deadlines. Also, mismanaging contract deadlines, performance deadlines, discount clauses and other time sensitive provisions result in unnecessary costs and continuing contract relationships that can be toxic.
Most CLM products offer staggered notifications for contract deadlines or at the very least provide a “tickler”, simple notification, for an impending expiration. By automating the notification of contract deadlines businesses are better able to manage their legal relationships more effectively. This increases efficiency and allows the legal department to better manage risk.
3. Regulatory Compliance
Regulatory compliance has always been important. However, meeting those requirements and complying with regulatory audits is a difficult and arduous task. Autonomous monitoring of digital contracts, data and sensitive documents allows for searching, compiling and exporting of records to meet audit needs. Centralized platforms that provide a Single Source of Truth for records management are critical for businesses operating in heavily regulated industries.
Adoption is often a difficult barrier for teams to overcome. An application’s ability to dovetail into existing productivity tools means the difference between teams using the software or not using it. Save precious time and resources by making sure that when you do decide on a CLM, it will easily API into your existing application suite.
5. Using Data to Optimize Contract Strategies
Understanding data and measuring the right characteristics of a business’s functionality can improve nearly every aspect of a business. This is also true for contract management. Analytics is being used to improve sales, procurement, and legal departments efficiency. Understanding at what stages contract negotiation is being delayed in the pre-execution phase allows teams to evaluate negotiation or sales strategies to improve performance.
Author: Karim Troost, Esq. Head of Legal