Understanding the Risks of Not Securing Contracts Properly
In this post, you’ll learn how poor contract management represents a risk to your organization, especially when it comes to not securing contracts properly.
What would your organization do if a hacker or disgruntled former employee was able to access your most sensitive business contracts? What would a malicious actor do with this confidential information? What legal and regulatory issues would you face from such a breach of security? Or, what if an employee accidentally deleted a legal agreement or supporting document? How would you recover this critical information?
Not securing contracts properly creates a real risk. Read on to learn all about these potential contract management risks – and what your organization can do to combat them.
Key Takeaways
- Not securing contracts properly due to poor contract management practices creates a serious business risk.
- Contract data is at risk of data breaches, lost or misplaced documents, ransomware attacks, data exfiltration, and the theft of proprietary information.
- To reduce contract-related security risks, use secure intake forms, employ e-signatures, centralize your contracts in a secure digital repository, control access to those contracts with permissions and authentication settings, encrypt all contract data, and require compliance to security standards such as SOC 2 Type II, HIPAA, PCI, and FISMA.
- Contract lifecycle management (CLM) software can reduce contract-related security risk by supporting all of the abovementioned security capabilities.
How Poor Contract Management Can Lead to Security Risks
According to research, 60-80% of all business operations revolve around contracts. All those contracts contain a wealth of valuable information about your company, the companies with which you do business, your business practices, your financial dealings, and more. Any malicious party accessing the confidential content in your contracts could do considerable harm to your company and your business partners. In addition, misplaced or even lost legal agreements can result in severe consequences such as an inability to manage obligations.
Securing contracts is difficult, if not impossible, when contract management is lax. The result is exposing your business to unnecessary risk. The highest contract management risks occur in the following circumstances:
- Contracts are circulated freely throughout your organization for approvals and signatures
- Paper contracts are physically stored in unsecure conditions
- Digital contracts like PDFs are scattered across the organization or stored in hard-to-secure shared drives and folders
In all these cases, the risk of unauthorized parties gaining access to contracts is high, which can lead to the information in those contracts falling into the wrong hands or getting lost.
What Kinds of Security Risks Result from Poor Contract Management?
Improperly securing contracts due to poor contract management exposes your organization to a variety of security risks, all of which can have significant consequences. Here are just a few of the contract-related security risks you’re likely to encounter in your organization.
Data Breach
Cybercriminals can attack contract-related data just as they can attack the other data stored by your organization. Cybersecurity Ventures predicts that there will be a cyberattack every 11 seconds this year – more than double the rate just two years ago.
SOURCE: https://www.varonis.com/
Ransomware Attack
Ransomware is one of the most insidious and fastest-growing threats to contract security. If your firm becomes a victim of ransomware, all of your data – including your contracts – are encrypted until you pay a hefty ransom to the attackers. According to security firm Sophos, the average ransomware demand in 2020 was $170,404.
Data Exfiltration
Up to 70% of ransomware attacks now include a data exfiltration component. In addition to encrypting data, attackers are now threatening to release the confidential contents of that data unless a ransom is paid.
Theft of Proprietary Information
What do data thieves do when they breach a system? One of their primary activities is to siphon off information that might prove useful. This can include:
- Legal information
- Supplier information
- Customer information
Much of this information is contained in your company’s contracts. Data thieves can sell this information to the highest bidder, causing problems for your customers, partners, and employees. A data breach can even put you at risk for noncompliance with industry and governmental privacy regulations.
Inadvertent Destruction of Data
Not properly securing contracts runs the risk of people accidentally deleting or misplacing agreements and supporting documents like a certificate of insurance (COI) or statement of work (SOW). This creates several types of risk such as not being able to manage obligations with clients since you don’t have the actual agreement, the potential for an auto renewal of an agreement you intended to cancel, and missed opportunities such as discounts with vendors and suppliers.
6 Ways to Reduce the Security Risks in Contract Management
There are several steps your organization can take to reduce contract security risk. Here are some of the most impactful ways you can do a better job of securing contracts.
1. Use Secure Forms to Intake Contract Data
If your employees still use email to request data for new contracts, your organization is at risk in a number of different ways:
- Email can be hacked
- Malware can be slipped into email attachments
- Emails could be sent to the wrong recipients
- Email is the most common method for launching phishing attacks
It’s better for your employees to use predefined and encrypted data intake forms when requesting contract-related data from parties both inside and outside your company. This not only keeps those requests confidential, it saves time by capturing all of the information up front in your process.
2. Employ E-Signatures
Your organization must move away from physical signatures on contracts to e-signatures. E-signatures are more secure because each one is directly tied to an individual, thus minimizing the risk of forged signatures and the like. They also help speed up the approval and execution processes and your end users will love them because they can sign from anywhere on any device.
3. Go Digital
Digital contracts are easier to secure than paper contracts. Paper contracts, in addition to taking up lots of space, are difficult to secure from enterprising thieves. Digital contracts, on the other hand, are just computer files that can be stored on a secure server with access limited to authorized users only. However, going digital is only a first step in securing contracts.
4. Centralize and Secure Your Stored Contracts
One of the most important things you can do to improve how you are securing contracts is to centralize all your contracts in one location. Contracts stored in multiple departments and locations and scattered across hard drives represent greater opportunities for cybercriminals. Store all your contracts in one central cloud-based repository– and then use robust data security tools, such as encryption, to prevent unauthorized access.
5. Control Contract Access
Not everyone should have access to your centralized contract repository. You need to control who has access to specific contracts and related data, which you can do by employing strict user permissions and authentication. You can further strengthen security by employing a zero-trust model that ensures that no one gets automatic access to data, no matter their title or position. It’s also important to leverage and configure the proper authentication settings around passwords, single sign-on, session times, etc. This is critical for certain regulatory compliance such as PCI.
6. Deploy a CLM Solution
Perhaps the best way to minimize contract-related security risks is to deploy contact management software. A robust contract management platform, such as the one offered by Contract Logix, automates much of the contract workflow and secures contracts and data throughout the entire process. Here are just a few of the ways you can make securing contracts easy and highly effective using contract management software from Contract Logix:
- Centralize all contracts in a secure, cloud-based repository
- Regulate access to data with role-based and feature-based permissions and robust authentication settings
- Encrypt all data at rest using AES 256 and in transit with TLS 1.2
- Use centralized request forms for intake of data
- Leverages packaged e-signature integrations to securely execute contracts
- Rest assured that the application is SOC 2 Type II, HIPAA, and FISMA
Let Contract Logix Help Reduce Contract-Related Security Risks and With Safely Securing Contracts
When you want to reduce the security risks associated with poor contract management, turn to the experts at Contract Logix. Our security-first CLM solutions automate all the steps of the contract lifecycle and centralize all your contracts in a secure and digital contract repository, which reduces or eliminates your security risk. You’ll also realize the benefits of streamlined workflow, fewer errors, and lower costs.
Contact Contract Logix today to learn more about mitigating contract risk and securing contracts in the most effective manner possible.