Digitally transforming contract management can help to improve compliance
According to the NASDAQ Global Compliance Survey, while companies are spending more to be adequately equipped to deal with regulatory changes and implementations, only 15% of firms feel fully prepared. According to NASDAQ, this can potentially leave firms exposed to both regulatory and reputational risk. The onus is on compliance teams to lead proactive efforts to ensure their firms are compliant both now and into the future.
One system that all compliance pros should be focused on when assessing their readiness is their company's contract lifecycle management (CLM) system. Contracts, which govern every dollar in and out of an organisation, form the foundation of commerce and can provide a strong bulwark against compliance risk, as they define the terms of work in any relationship. In many companies, however, the contract management process is largely manual. According to LexisNexis' recent report Legal Technology: Looking Past the Hype, only 26% of corporate legal departments are using a contract management technology solution to address this important area.
The challenge is that from authoring contracts to renewals, there are many different stages within the contract process that need to be carefully managed to address compliance issues. Organisations are tasked with overseeing an enormous array of contracts, each going back and forth over email, with multiple amends and questions sent between legal, procurement, compliance and sales teams; all forced to reconcile, negotiate and approve them as quickly as possible to keep the business ahead of competitors and shifting markets.
Meanwhile, the legacy contracts that need to be monitored to ensure compliance can slip off the radar. According to research by the Institute of Supply Management, the average Fortune 1000 company holds between 20,000 and 40,000 contractual files. Each contains multiple clauses and obligations - all of which if missed, can have a critical business impact.
Forward-thinking companies are starting to digitize this workflow to ensure speed while reducing risk and improving compliance. There are three key ways that a fully digital contract management system can help improve compliance in an organisation ranging from simple inclusion of key compliance terms in contracts to robust management of complex contract compliance issues.
Ensuring Proper Documentation
For large companies, ensuring proper contract terms are included in a contract during the authoring process can be a...