Whether you are a legal operations professional or a chief legal officer at your company, contracts undoubtedly play a role in your corporate counsel responsibilities.
Maybe you’ve been tasked with figuring out how to reduce the time it takes for your department to turn redlines on sales contracts that come in from the field. Or maybe you’ve been asked to conduct a risk and legal liability audit of contractual relationships across the enterprise.
Whatever your role, it’s likely to become more complex in recent years. The regulatory landscape in which contracts are at play is constantly changing; a globalized marketplace connected by digital communication has accelerated the pace of business; supply chains have become more globalized and sales contracts more intricate.
To address these challenges, corporate legal departments are taking a lead in adopting a new approach that helps them manage contracts holistically. That approach is enterprise contract management.
Enterprise contract management transforms both how a legal department operates internally and with outside stakeholders. And, ultimately, it changes how an entire enterprise looks at its contractual foundation.
As an introduction, here are five views of enterprise contract management from a corporate counsel point of-view.
1. Enterprise Contract Management as Provider of Risk Management and Strategic Data
We’ve all heard the wisecrack: Legal is “the department of no” (or, at best, the “department of slow”). Sales and procurement look at the legal team as a hurdle to their success, rather than a guardian of the business.
Traditionally, this reputation for legal has grown out of a difference in posture toward risk. Sales might be more comfortable with a high-risk, high-reward deal, while legal defaults to a protective stance. The problem in this common scenario was that neither side was operating with much data.
Contracts can serve as a barometer of corporate risk, telling company leaders where it is doing business, with whom and on what terms. Yet gaining a holistic view of these contractual terms is impossible without a centralized digital contract platform.
With an enterprise contract management platform, legal can pull data on how different indemnity clauses have performed to choose the best language, identify suppliers or customers with reputational issues using data from third parties, and assign precise risk ratings to contracts or classes of contracts as a whole.
In this way, the enterprise contract management platform can allow legal teams to bring actionable data to the table when advising on risk and strategy.
2. Enterprise Contract Management as an Operations Streamliner
According to the International Association of Contract and Commercial Managers (IACCM), poor contracting processes can cost companies 9.2% of their revenue.
When you consider how many business users handle contracts, this isn’t surprising. When emails are sent back and forth between stakeholders with contracts and redlines attached, there is no sure way to know which represents the master and no way to measure where contracts are getting hung up in the process. Even those firms that have migrated to a content management system that addresses version control still have no insights into contract turn-around time, where delays are occurring, which redlines violate regulatory and commercial rules, and so on.
Conversely, with an enterprise contract management platform, all contracts are managed centrally. Legal departments can cut down on the number of templates used, reducing risk and speeding up approvals. And the platform can deliver key performance metrics on how many contracts a company is handling and how long they are taking at each stage of the approval process. With this data, legal departments can identify and address bottlenecks, streamlining the process.
3. Enterprise Contract Management as a Negotiation Playbook
Contract negotiations offer legal counsel an opportunity to showcase their deep experience and knowledge to create better outcomes for the organization. Many lawyers still lug around three-ring binders filled with accumulated templates and clauses to respond to negotiation scenarios, while others have evolved to using a folder on their PC desktop.
By contrast, an enterprise contract management platform captures every redline and contextual conversation around those changes (such as messages between the contract parties) for full visibility into the negotiation process. The platform then tracks contract performance by pulling data from other systems like ERP and CRM. When it comes time to negotiate a renewal, counsel has a 360 view of past negotiation tactics and performance to better plan out how to handle the negotiations. With the help of artificial intelligence, companies can take these capabilities even further, analyzing contract language and outcomes at scale to drive better decision making when parties come to the table.
4. Enterprise Contract Management as a Business Unifier
For a long time, legal departments stayed in their lane until the business came to them with contracting needs.
That is changing, though, as legal heads use their position as advisors and protectors of the business to drive strategic change across the company. One way they are doing this is by using contract management software to unify the entire enterprise’s operations.
Consider the journey of Colin Flannery, worldwide General Counsel at Vertiv. Following its divestiture from Emerson Electric, the then-new CEO of Vertiv announced an objective to unify the company’s culture: “One Vertiv.” Accordingly, each department leader was charged with manifesting this mission in a demonstrable way.
The Vertiv legal department recognized that contracts were the glue that held together the global and matrixed enterprise. Accordingly, they responded by spearheading an enterprise contract management initiative to unify disparate legal teams scattered across the globe and even more disparate contracting processes supporting the Vertiv business.
Using enterprise contract management, the legal department was able to re-engineer their contracting process with the aim of creating a single source of truth for their worldwide agreements.
5. Enterprise Contract Management as an Institutional Knowledge Repository
Lastly, an enterprise contract management platform can act as a valuable repository for institutional knowledge captured across an organization.
Take for example a major airline that is an Icertis customer. This company relies heavily on agreements with partner airlines to drive revenue. Its executive team realized that much of its partner operations relied on the memory of individual members of its legal team—a situation that leadership knew was not sustainable.
To build an organization that could stand the test of time, the company sought a software solution it could “build memory” into. Since contracts form the foundation of these partner agreements, an enterprise contract management platform was the obvious fit.
With an enterprise-wide contract management system, the airline has a single source of truth for all of its partner operations and does not have to rely on the memory of people who show up for work each day. In this way the system is creating a more sustainable, future-proof system and will allow the company to optimize these crucial operations, regardless of the team members leading the charge.
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So, what is enterprise contract management? For corporate counsel, it eludes a narrow definition. The outcome, though, is a contracting process that turns static documents into strategic corporate assets that can accelerate, protect and optimize business.
The above examples only scratch the surface of how this new approach to contracts is helping business. If you’d like to learn more, please don’t hesitate to reach out to us.