Knowing what to do with high volumes of paperwork and digital files is a key challenge in the enterprise. Within contract management, records management is an even bigger challenge: between employment agreements, customer and vendor contracts, NDAs and a host of other agreement types, enterprise contract portfolios can consist of tens of thousands of contracts, both current and archival.
The ability to access these vital documents on demand is crucial for administering contracts, meeting compliance requirements and other critical contract-related objectives. And yet it’s estimated that more than seven in 10 companies are unable to locate at least 10 percent of their contracts.
As such, the first step to successful contract management is taking an organized and systematic approach to records management. While the prospect of organizing so many documents may seem overwhelming, it’s easier than you think to get started – especially if you begin employing an organizational system for all documents moving forward, and then migrate your historical contracts on an as-needed basis over time.
Considering that the investment in getting started is so minimal, the ROI of doing so is overwhelmingly positive. If you don't yet have a strong records management system in place, here are four key impacts you can't afford to ignore.
1. Access the information you need, when you need it
If you don’t have an organized method for storing contracts and other documents, you can lose hours (if not more) trying to find key information. And considering that there are numerous times within the contract management lifecycle when you will likely need to refer to your agreements, multiplied by the number of contracts you may need to monitor, this wasted time can add up fast.
An organized records management system makes retrieving specific contracts and information quick and effortless. If you are using an online platform, look for features such as intuitive organizational structures, such as folder trees, and tagging, both of which can make it easy to spot what you’re looking for at a glance. A platform that enables text-based searches can also make it easy to access specific records.
2. Better contract management
According to the International Association of Contract and Commercial Management, good contract management can improve enterprise profitability by the equivalent of nearly 10 percent of annual revenue. And from planning and drafting-related tasks, such as analyzing the performance of previous contracts to develop optimal new agreements, through to monitoring performance during the contract term and determining whether to renew an agreement, you’ll need to regularly refer back to your contracts to achieve better management.
Without an efficient records management system, this can become an exercise in futility – not only can it be difficult and time-consuming, if not impossible, to seek out this information, but if you file away your contracts thoughtlessly, chances are these tasks won’t be top of mind. Because obtaining the greatest value of your contracts requires careful management, it’s important to stay organized. Even better, look for a records management system that offers automated features such as reports and notifications that can further reduce the burdens of managing contracts.
3. Improved document security
Taking a willy-nilly approach to document storage makes it harder to protect the sensitive data your files may contain, including competitive information and trade secrets. Without a clear system for managing records, there’s no way to ensure employees aren’t leaving confidential documents out in the open or accessing them online across insecure channels, or taking any other actions that could compromise their security. On the other hand, taking a systemic approach to records management allows you to incorporate measures that will offer the best-possible document protection.
If you’re storing your documents online, two things to consider are how your records are stored and how they may be accessed. For storage, look for a solution that offers best-in-class measures such as encryption and physical protection of the server location. It’s also important that you reduce the risk of unauthorized access to your documents via user authentication features and permission-based access controls.
4. Reduce the risk of compliance penalties and other costs
From GDPR to industry-specific regulations such as HIPAA, enterprises are subject to a host of requirements around how they handle sensitive data. Failure to comply can be extremely costly, both in terms of hefty fines and the reputational damage that can result. And even if you don’t get hit with compliance violations, as cyber crime increases, so does the risk of costly data breaches – according to one annual review, in 2018 the average cost of a data breach hit $3.86 million, a 6.4 percent increase over the previous year.
Knowing what data you have in your position and where it is stored is key to reducing these risks. A strong records management system allows you to identify contracts and other documents that require special handling due to compliance policies. And in the event of a breach, the annual survey found that being able to identify and contain the problem quickly plays a significant role in mitigating costs – and that starts with knowing where your data is.