Contract Risk Assessment: How Do I Start?
While contracts are relatively straightforward in their construction - offer, acceptance, and consideration - beneath the surface lie a multitude of opportunity and obligation. Adding another layer of complexity, many contracts can be subject to competing authorities depending on the location of the parties, the ever-evolving regulatory landscape, and internal policies or responsibilities.
Building Better Relationships
Contracts begin by allocating responsibilities, creating assets or benefits, and assigning liability. Organizations depend on contracts to thrive by providing a way to establish trust and delineate responsibility. Only when all parties feel confident that their interests are protected can a productive and prosperous business relationship thrive. Because contracts require compliance from all signatories, participants can dispatch their duties confidently, knowing that the other side will perform their tasks or face previously agreed upon penalties.
Introduce Comprehensive Oversight
When assessing the risks, your organization must look beyond strict compliance. Deadlines and milestones, conditions precedent, and limited visibility can impact how a contract is interpreted and enforced. Missing deadlines, for example, can result in lost revenue or additional fees. When a contract includes requirements before payout, certain benefits could end up unavailable if your company fails to perform the qualifying act or meet the appropriate benchmark in a specified amount of time. Finally, your team should know the location and contents of each contract entered into by your organization. Without this institutional knowledge, your department will inevitably miss opportunities, fail to act on automatic renewals, and miss expiration dates and other critical milestones.
Finding the Right Contract Risk Assessment Tools
Implementing the right contract risk assessment strategy will not only help your organization protect its business interests, but it will also allow your company to seize a whole host of opportunities including streamlined workflows, increased operational efficiency, reduce costs, and new sources of revenue.
For more information on initiating your own contract risk assessment, download our whitepaper, An Introductory Guide to Contract Risk Assessment. In this ebook, you will gain a better understanding of contract risk - what it is, how to manage it, and the tools available to begin a thorough contract risk assessment. You’ll also see why deploying a more effective contract risk assessment strategy can help you avoid some of the hidden liabilities and expenses (noncompliance, missed deadlines, auto-renewals) that may be lurking in your contracts.