Contract management is an entire skill unto itself, and as such is often the responsibility of a dedicated employee within the company. With the volume of contracts constantly increasing, it is becoming difficult to tackle this task without help from digital tools!
What are the key challenges involved in contract management in 2022? How can automation help to address these issues?
The major challenges of contract management
In 2022, managing all of your company’s contracts without the use of a tool is impossible… And there is no escaping the risks that go along with handling them manually. With that in mind, here are some of the biggest challenges that contract management entails.
Quantities that make manual handling difficult, if not impossible
According to a PwC survey, large companies each have anywhere between 20,000 and 40,000 contracts to handle on average. While handling these manually is possible for small volumes in the order of a few dozen per month, these sorts of colossal quantities make manual management nigh impossible! And, if companies do achieve this, it comes at the cost of valuable working hours, along with a risk of error commensurate with the volume of contracts being managed.
Manually handling contracts results in countless problems, starting with engaging skilled employees (i.e. lawyers) in carrying out repetitive, time-consuming tasks such as copying/pasting clauses, proofreading, following up on emails, etc. After all, while they are tied up with these (unfortunately essential) tasks, legal experts are kept from devoting their attention to their core business, which includes key responsibilities such as legal monitoring and advice.
What is more, with such a vast volume of documents, it is almost impossible to avoid any sort of mistake or oversight: unknown deadlines, non-compliance with one or more contracts, exorbitant amounts… These are all legal and financial risks that constantly loom threateningly over the company.
Contracts are not fixed texts, but rather documents in constant evolution, with a whole lifecycle of their own.
Before being signed, the contract goes through multiple stages: drafting, negotiation and approval. Then, once signed, the company must ensure its proper performance and keep track of the key dates, which are critical when the contract is subject to tacit renewal.
At every single one of these stages — and particularly before signature — contracts must pass through countless hands: the legal department, other internal company departments (purchasing, sales, HR, finance), not to mention all the external parties, namely clients and suppliers, for the most part.
These exchanges between all the different stakeholders result in collaboration becoming complex and difficult to organize. The challenge here is multifaceted: first of all, the lawyers have to ensure that the operational staff are fully aware of and compliant with proper legal practices, so as to avoid possible disputes in the future.
Then, the negotiation and approval process has to be as smooth as possible so that the company can maintain good relations with its clients and suppliers.
Finally, in a landscape where staff turnover is constantly on the rise and remote work is becoming the norm, the risk of information being lost or leaked and commitments not being respected is significant.
The ever-changing regulatory scenario
Whatever the volume being handled, contract management would be a great deal simpler if the laws and regulations around it remained unchanged over time. Alas, that is far from being the case! According to a study by Thomson Reuters, somewhere in the world, a regulation changes every 10 minutes on average.
Practically speaking, this means that lawyers must remain eagle-eyed at all times, constantly reviewing all contracts to identify and amend the affected clauses. The risk of oversight — and therefore litigation — is significant here, not to mention the mountains of tedious, time-consuming work imposed on the legal department!
Fortunately, while the field of contract management is undeniably becoming more complex by the day, there are technologies to compensate for this and simplify the work of those responsible for it.
Automation in legal departments: a must-have solution
The digitalization of the legal sector is by no means a recent phenomenon. Indeed, contracts and other documents have been used and stored in digital form, as well as produced using office software, for several decades now. But this does nothing to diminish the challenges mentioned above: the truth is that in order to tackle the skyrocketing volume of contracts and the constant evolution of regulations, legal departments need to automate some of their work.
Automation is a means of delegating the most repetitive and time-consuming tasks to software, freeing up time for human employees to focus on other matters. In practice, in the context of contract management, this can involve:
- searching for and entering information;
- simplifying the negotiation and approval processes;
- establishing automatic reminders for deadlines.
In all these areas and more, IT can prove to be of great assistance to lawyers. What is more, contract management tools such as DiliTrust’s Contracts module can incorporate artificial intelligence algorithms which allow for incredibly refined automatic analysis of contracts: smart search tools, identification of key information, producing dashboards with relevant KPIs, and much more.
Again, the amount of time saved is astonishing – not to mention the company’s improved grasp on its contracts, which reduces the risk of error and facilitates decision-making. Not just a technological innovation, but a strategic one too!
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