Contract Compliance: How to Beat the Heat Now!
By Timothy Donaghy
Published in CustomerThink.com on July 25, 2018
Are you feeling the heat from compliance? If so, you’re not alone. An increasing number of industries are being regulated by federal, state, and local agencies, and these regulations are directly reflected in the contracts that exist between companies and their suppliers, employees, subcontractors, and customers. This degree of regulation poses a significant compliance burden on businesses that are already trying to create, negotiate, and execute contracts with maximum efficiency and minimum risk. But technology can help. Over the past few years, the growing adoption of specialized contract management software has helped companies:
• Streamline contract creation and approval
• Limit legal team involvement in contracting
• Ensure contract milestones are not missed
• Identify how new & changing regulations impact contracts
• Quantify the impact of corporate policy changes
• Enforce contractual compliance
Let’s take a look at how each of these are accomplished and how they help you mitigate risk:
Streamline Contract Creation & Approval
Today’s contract management technology provides a secure electronic central repository for companies to import, enter, and store the data and documents associated with their contractual agreements. This limits the risk associated with not being able to get your hands on the latest version of a contract because it could be one on several people’s hard drives, in some shared folder, or in a steel filing cabinet.
But beyond that, this technology also provides access to electronic contract clause and template libraries that house pre-approved contract language, and optional alternative language, that facilitates the authoring of contacts.
Once a contract is drafted using these libraries, automated workflows define and track its progress through the negotiation and approval process. The software captures all the red-lining that is performed and ensures that the appropriate parties required in the approval process act promptly.
Final execution includes the use of e-signature technology, which has already become the norm for so many companies. This end-to-end automation can dramatically increase your velocity to revenue.
Limit Legal Team Involvement
Your legal team can utilize contract management technology to make these pre-approved contract clauses and templates available to your end-user community, and define the parties required to approve a final contract. This effectively empowers your non-legal team members to draft viable contacts, send them to the contracted party, and manage them through the workflow process to final execution. This allows your in-house or external legal resources to focus on true legal work, rather than on work that can be performed by administrative or dedicated contracting staff. And by limiting your team’s ability to deviate from standard contractual language, you limit the risk associated with terms that may not meet your corporate or legal requirements.
Manage Contract Deadlines & Milestones
Within these platforms you can create automated alerts associated with key contractual deadlines or deliverables, to remind yourself or others to take a specific action at a specific time. Perhaps an auto-renewal date is approaching with one of your suppliers that you do not want to renew.
Or a new pricing schedule needs to go into effect once one of your customers reaches (or fails to reach) certain milestones, and you need to implement and communicate the change. Staying on top of deadlines and milestones such as these is paramount in minimizing risk.
Identify & Quantify the Impact of Regulatory or Policy Changes
One of the major benefits derived from storing all your contracts and associated documents in an electronic repository is its searchability. Imagine that a new industry regulation is slated to go into effect at year’s end. Simply run a search for occurrences of “OSHA” or “limitations of liability” to uncover all your contracts and supporting materials that may be affected by the change.
Similarly, suppose you’re considering a change to a corporate policy. A few keystrokes and a click of a mouse surface all instances of “cancellation within 7 days,” or “a 5% penalty.” In either case, by identifying and quantifying the contracts affected, you can inform your risk mitigation strategy, and define which parties will need to be approached regarding the change.
Whether it be your compliance to commitments you’ve made to third parties or to industry regulations, or compliance by third parties to your organization, this technology puts systemic checks and balances in place to ensure that compliance.
By making sure you can always find the right version of an agreement, ensuring that only approved contractual language is used, getting a “heads-up” well in advance of important contractual milestones, and isolating agreements affected by changes to your industry environment, compliance is the objective. And the natural result of a high level of compliance, is a low level of risk.
Read the full article at: https://www.customerthink.com/contract-compliance-how-to-beat-the-heat-now/