Large Fortune 1000 companies transact in thousands of contracts on a yearly basis. Contracts if not managed well can soon turn into liabilities for organizations. With contracts holding important company information, financials, regulations, and obligations, managing them closely throughout their lifecycle is important to steer clear of any risks. As these contracts are often lengthy documents with multiple sections, clauses, and obligations, if not handled effectively, these can expose companies to unprecedented risks.
Are your contracts at risk?
Contracts can often have risks hidden in them, which if unattended can lead to serious repercussions in the form of penalties, fines and reputational losses.
With compliance regulations changing rapidly, clauses that are valid today might not be valid tomorrow. Such redundant clauses, if unchecked, can make your contracts non-compliant and can put your company at risk. Going through all legacy contracts manually to check for redundant clauses is a nearly impossible task considering these contracts often run in thousands.
Manually drafted contracts with a manual approval process could reach the execution stage without right reviews and approvals. With limited visibility, and no reviews from legal, these contracts could then have unapproved, non-compliant terms that could put the company at risk.
Even a single wrong sentence or one misspelled word could tip your contracts over to the non-compliance side. Without pre-approved templates in place, and with every department drafting their own contracts, legal teams have a hard time to go through each one thoroughly, leaving room for manual errors or omissions.
Companies sign contracts to run smooth business transactions and make profits out of these dealings. To ensure your contracts are helping you make money and not lose them, its important to include obligations with respect to expected quality, quantities, commercials, timelines etc of the products or services in question. Without standardized templates, companies might miss out on including the right obligations in order to get maximum returns. Missing certain obligations could also increase a company’s risk of not getting timely payments, deliveries and losing out on money.
Contracts are signed to maintain a single point of truth for all business transactions. One of the mains of a contract is to limit exposure to liabilities and risks. If not reviewed correctly, the language in these contracts might not allow you to transfer liability, putting your organization at a greater risk.
Avoiding risks lurking in your contracts
Now that we have identified certain risks hidden in contracts, it’s time to understand how to avoid them and resolve them. An automated, integrated contract lifecycle management solution is a great way to ensure your contracts are compliant and secure from all risks.
- Pre-approved templates and smart clause libraries for hints and suggestions ensure that the contract language is accurate and includes all necessary clauses.
- With standardized templates, legal teams find it easy to quickly go through the contract documents and identify any deviations.
- Pre-configured workflows ensure contracts go to the right stakeholders for reviews, approvals and negotiations. Backed by alerts and triggers contracts are then quickly reviewed and no step or review is missed.
- The CLM system automatically saves all changes and all versions, ensuring there is an audit trail, increased visibility and accountability and that only the latest version is sent forward.
- Artificial Intelligence powered solutions help track any inconsistencies in contract performance through milestones and metrics tracking and highlight any non-compliance. This helps in quick remediation and maintaining the pace of contracts.
- An automated, digitized solution with a centralized repository can identify any redundant clauses in all past legacy contracts and replace them with the latest clauses and regulations.
Considering that compliance regulations are changing rapidly, and the compliance landscape is getting more complex by the day, a smart, digitized contract management solution has become a necessity. Now is the best time for companies to invest in smart AI powered CLM solutions to ensure maximum compliance and avoid sever organizational risks.
Ultria CLM offers unparalleled insights into your contract documents, quickly providing you with relevant information about contract performance and regulatory compliance via a single view customizable dashboard. To learn more about how Ultria can ensure compliance across all your agreements and help you follow the best practices for contract management contact us now.