Contracts provide a clear and legally-binding framework for navigating all of your business dealings, from employment arrangements to purchase deals for key parts and supplies. While well-defined contract terms can help to reduce any risks related to your business arrangement, a contract alone is only of limited power. It is through the effective management of contracts that businesses truly reduce their vulnerabilities.
Fortunately, technology has greatly improved the discipline of contract management, providing features that make it easier and more efficient to handle agreements at every stage. To reduce your contractual risks, look for these four tools.
1. Flexible Online Storage
One of the easiest ways to increase the riskiness of contract management is to try to administer your agreements while flying blind – i.e. without knowing where your contract is or exactly what all parties are obligated to do to fulfill it. But while most people would never dream of flying a plane without the appropriate mapping tools, it would appear that far too many businesses are doing so, if you consider the stat that a majority of companies can’t even locate at least 10 percent of their contracts.
As any organizing pro will tell you, everything has its place – and creating a dedicated storage location for all your agreements is an important first step to keeping them centralized and easily findable. Scalable online storage allows you to build a directory of all your agreements so that they can be easily referenced during the contract term to ensure you are meeting your obligations and thereby reducing your risks.
2. Text-based Search
While storing your contracts all together is a good first step, you’re missing out on some key ways to reduce your risks if your contracts aren’t easy to parse. Text-based search tools allow you to look within your contracts, in order to pull up agreements that include specific terms, geographical locations or other precise parameters. The ability to pull contracts based on search terms can help you to reduce contractual risks in numerous ways. Here are a couple examples:
Prior to drafting a new agreement, search can help you to identify similar agreements that have been used in the past. Referencing historical agreements can help you to pinpoint appropriate terms and controls that are relevant to this new situation, the inclusion of which in your new contract could reduce your risks.
If changing regulatory, political, or other forces require you to take quick action on specific contracts to reduce risk, you can use parameters such as country information for contracted parties or type of agreement to quickly pull all relevant agreements.
3. Automated Notifications and Reminders
A failure to stay on top of your contractual obligations – or just to monitor your contract’s performance – carries both obvious and hidden risks. On the more obvious side of things, contracts carry a set of obligations, which often include timelines and deadlines – along with penalties for failing to meet the dates you have committed to. But even in the absence of explicit deadlines, a failure to keep track of contract performance could lead you to miss warning signs of risks that could be addressed before they become full-on problems.
Employing automated notifications and reminders can reduce some of the work of remembering each and every contract-related task – as well as the risk of forgetting. Simply identify relevant milestones and deadlines up front and set up reminders to trigger as needed, thereby cutting your risk of penalties, unwanted automatic renewals, and other costly issues that could arise.
4. Access and Security Controls
Today’s heightened regulatory climate means that businesses, and their partners, commonly face greater confidentiality and privacy requirements than in previous eras. Understanding your legal obligations to this effect, along with your obligations to customers as a third-party supplier and/or the contractual assurances you must get from vendors and suppliers, is the first step in reducing compliance-related risks.
But access and security controls embedded within your contract management solution are also key to reducing your risks. There are several considerations to think about:
Access control: The confidential nature of contracts, and their compliance requirements, mean it’s important to eliminate opportunities for unauthorized individuals to access your agreements. Granular permissions management tools allow an administrator to assign access to specific individuals as required, reducing the risk that the wrong person could access sensitive information. As well, features such as multi-factor authentication can help you to ensure that unauthorized individuals can’t illegally access contracts using someone else’s credentials.
State-of-the-art cloud security: The growing prevalence of data breaches means you should also give some thought to how contracts are transmitted and stored. After all, if your business is subject to compliance rules around protecting customer data and other sensitive information, then a breach poses a double contractual risk – the first from the breach itself, and the second due to any penalties or reparations you must pay for failing to employ adequate protections. Look for a solution that encrypts your contract information, both while it is being transmitted to data centers and during storage, as well as a cloud storage facility that employs a range of protective tactics including physical security and offsite backups.