Financial Services Contract Management: What You Should Be Looking For
March 8th, 2023
Contracts are notoriously complex, as well as vitally important for financial services.
In a field where a single missing comma could cost millions, contract management software (CMS) helps finance companies keep track of their legal documents.
Choosing the right financial services contract management software is a daunting task, but this guide makes it easy. We have explored the main criteria you should consider when looking for the right contract management software: security, flexibility, and functionality.
- Financial services Contract management software helps companies track and manage their contracts.
- The right software should adhere to high compliance standards, encryption, and security certifications.
- No two companies are alike, so your contract management software should conform to your unique needs—not the other way around.
- Technology should make your job easier, not harder. Contract management software should have added functions that make your contract management more efficient and effective.
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Financial Services Contract Management Software Fundamentals
Businesses design contracts to be as unambiguous as possible, but contracts can quickly become complicated despite this. The more contracts you use, the more complex and unwieldy your contract management becomes.
Do you know what terms each of your contracts contains? Do you even know where all your contracts are located?
“Contract manager” is both a job title and a type of software, and the two often go hand in hand. Managing contracts requires both the right knowledge and the right tools. Especially in financial services where contracts are both ubiquitous and essential, contract lifecycle management (CLM) software is an indispensable tool.
Contract management software is specialized software businesses use to manage their contract administration and lifecycle. In other words, CLM helps organizations store, secure, configure, request, track, and create contracts.
That said, CLM for financial services must have at least three key qualities: security, flexibility, and functionality.
Imagine a high-security vault: it’s surrounded by 1 foot of solid steel and another 3 feet of reinforced concrete and buried deep underground in a secret location. While this vault is extremely secure, it has a big problem: if nobody can get to it, nobody can use it.
Contract management software must accomplish two things at once: keep your contracts completely secure and make them accessible to the right people. It’s difficult to be secure, but it’s even more difficult to be secure AND accessible. Fortunately, the right contract management software can provide you with both benefits.
With so many CLM options, how do you know your system is as secure as it should be?
Depending on the type of financial services you offer, you might be subject to laws like HIPAA (Health Insurance Portability and Accountability Act), which protects the medical information of individuals, or FISMA (Federal Information Security Modernization Act), which protects government information.
Compliance with these regulations is not optional, so if your contract management software isn’t up to the task, you could find yourself facing government hearings, loss of federal funding, up to $1.5 million in penalties, and even up to 10 years in jail.
Like students passing notes in class, encryption uses a secret code to hide the content of a document. This means that even if a malicious third party intercepted it, they wouldn’t be able to read it. It does this by using a security key to encode the contract when it’s in transit or at rest and then decode it when the document is in use. This ensures only the sender and recipient can view the decoded version of the document.
There are different levels of security in encryption that range in complexity: a more complex encryption is harder to crack and more secure. Your company should use a CLM that supports AES (Advanced Encryption Standard) 256 encryption – an encryption standard that uses a 256-bit encryption key and is practically uncrackable.
A 256-bit encryption key has 110 quattuorvigintillion possible combinations – i.e., 110 followed by 75 zeroes. It is so secure that while it’s theoretically possible, a 256-bit encryption key has never been broken.
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Ongoing Security Certification
While regulatory compliance and sophisticated encryption are essential, you need a CLM that uses them as a jumping-off point, not as a final destination. When selecting a financial services contract management software, look for one that exceeds the legal and technical minimums.
SOC 2 Type II is a certification created by the AICPA (Association of International Certified Professional Accountants) to assess the operating effectiveness of controls. This is an example of the type of ongoing certification that you should look for in a CLM.
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It’s important that your software meets your needs, and while all financial services have some shared needs, no two organizations are exactly alike.
This means that the best contract management software doesn’t force a square peg into a round hole. Rather it gives your organization the flexibility to create a contract management system that meets your own specific needs.
Software like Contract Logix accomplishes this flexibility by providing out-of-the-box forms that allow companies to plug and play with minimal setup, along with robust controls that allow companies to customize their system to be as simple or as sophisticated as they need.
You want a solution that puts you in the driver’s seat by allowing you to configure your system to meet your own unique needs.
This includes the ability to create customized workflows, set specific security parameters, and generate your own contract templates.
Document management is important for organizations of every size, but a good contract management software should add value to your contract management specifically.
You should look for a CLM that makes your job easier and better. This means added functionality that’s specific to contract management, like the ability to request contracts from third-party suppliers, rules-based contract creation, and workflow automation.
Functions like these are what elevate the right contract management software above generic solutions. Technology should make your job easier, not harder, and the best contract management software should streamline your processes. With the right tools, you should not only be able to manage your contracts more efficiently than before but also accomplish new things.
Do I Need Financial Services Contract Management Software?
Contract management is the perfect storm: not only is the process of contract administration and lifecycle management complex, but it’s also high stakes.
While some organizations may be able to get by without specialized software, financial services can benefit from having CLM from Contract Logix on their side.
Contract Logix gives companies the control and intelligence to efficiently manage their contracts with features like optical character recognition, rules-based content creation, artificial intelligence, and industry-leading compliance with HIPAA, FISMA, SOC 2 Type II, and more.
Request a demo today to transform your organization’s contract management process.
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