Category: Contract Lifecycle Management Software
If you’re just joining in now, feel free to go back to part 1 of this blog series.
If not, here is a quick recap:
There isn’t much time left to come up with a plan for the new revenue recognition guidelines since they are coming into effect in 2018. There are a lot of factors and hard work that go into complying with these new standards, so we’ve simplified the process by taking a three-step approach to help you on your journey to increasing compliance.
Step 1: Assessment- By now you should have already performed an initial assessment of your systems, processes and internal controls. This is meant to help you understand exactly what information needs to be captured and reported on, and where that may require certain modifications to your current process, system, and/or controls. It will also help you better prepare for the impact it will have on your business.
Step 2: Identifying the Impact
Once you have completed your internal assessment and have a better idea of what information needs to be captured and reported on, you will now need to consider how the new standard will impact your entire organization. How will it affect your sales team? Your accounting department? Do you need to re-evaluate company expenses? Do you know exactly where all of your contracts are located with each customer and are they the correct, finalized and signed version?
In order to fully identify the impact, you will need to locate and organize each customer contract. The new standard calls for a review of each agreement to understand if any modifications need to be made. For example, the performance obligations changes include determining whether or not a good or service needs to be accounted for separately or be combined into one single performance obligation. You may find you have more, or fewer performance obligations than in the past, but either way you will need to double check all contracts to make sure you are in compliance.
If your contracts are not yet organized in one central and secure repository, then you could be putting your entire business at risk. Maybe you have thousands of contracts that are living with the sales or procurement departments. Maybe you don’t have the latest version of an executed agreement. Getting organized is going to be a huge undertaking and will require cross-departmental participation. Implementing enterprise contract management software can streamline the process, save valuable time, and increase compliance and best practices throughout your organization. By implementing a solution you could capture the data from your contracts right off the bat and see the implications on your revenue within minutes. This would save much needed time, resources and costs associated with failing to recognize revenue.
So, since you are already reviewing your process for the new standards consider deepening your insight into your contractual data. It’s the perfect time to incorporate enterprise contract management software into your revenue recognition process.
If you’re interested in learning how an enterprise contract management platform can help you increase compliance throughout your entire organization, contact us here.
Tune in next week for the third and final step of the process where we discuss actions for implementing the changes.
Last Tuesday we held a joint webinar with IACCM’s CEO Tim Cummins alongside our Co-Founder Jamie Wodetzki, in which they discussed the topic of Artificial Intelligence (A.I.) for contracts professionals, what it means and how it will impact their business and career in the near future.
A.I. is creeping into nearly every aspect of our lives – whether we realize it or not. We’ve been hearing promises that A.I. will change how we work and live for decades, yet over the last few years, there has been an explosion of progress fueled by leaps in computing power, natural language processing, and neural network design.
So, we all have a choice… A.I. is something we can learn more about and begin to embrace or we can choose to turn the other way and hope it won’t upend our work and personal lives. With any luck, we may be pleasantly surprised that A.I will, in fact, offer up new tools and insights we can use to our advantage in our professional daily lives.
In order to understand any topic, you must do your initial research. A participant from the webinar asked for recommendations on where they could look to learn more about A.I. and how they should get started. So, we put together an A.I. reading list below to help you get started on your exploration phase. Don’t limit yourself to just this reading list – there are numerous podcasts, articles, and videos out there. If you find anything particularly interesting, please don’t be greedy and share in the comments section with the rest of us!
You did your Google research, re-watched the webinar, read the provided reading list below and watched the movie Arrival and now know who Louise Banks is- you’re basically an A.I. expert. So the question now is, what A.I. tools are out there that can complement the work you are doing as a contracts professional?
Now that you understand the benefits A.I. can bring to your business and career, you can start to evaluate your current processes, systems, and controls. Think deeper about how A.I. can automate document creation, connect enterprise systems to share data, or generate deeper analytics for reporting. Thinking about improvements in your current daily tasks will help you identify what requirements are needed when evaluating different platforms. Data capture of legacy agreements, advanced reporting capabilities, contract automation and enterprise integrations should be a few of the top capabilities you look for when evaluating a contract management platform.
Once you have evaluated and chosen a platform, embrace it! Adopt it company-wide, take action to learn the ins and outs and everything it can help you accomplish, and teach your colleagues about it. The more you learn about how A.I. can complement your daily tasks in your career, the less fearful you will be of a complete takeover. You’ll be seen as a Contracts A.I. Master and everyone will thank you for making their jobs just a little easier, and a lot less manual.
If you are in the exploration or evaluation phase, don’t hesitate to contact us now to discuss how our enterprise contract management platform can help meet your business challenges and prepare you for A.I.
An A.I. Reading List for Contracts Professionals
Artificial Intelligence is entering the contracts world. In order to best prepare, it is necessary to take steps to understand how it will impact contracts professionals and their careers and businesses. Our co-founder Jamie Wodetzki has put together a comprehensive reading resource guide below to help you get started on your initial research.
Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial Intelligence, Yale University Press, 2015, Jerry Kaplan, http://jerrykaplan.com/books/
The Great AI Awakening, The New York Times Magazine, December 14, 2016, Gideon Lewis-Kraus, https://www.nytimes.com/2016/12/14/magazine/the-great-ai-awakening.html
The Future of the Professions, Oxford University Press, 2015, Richard Susskind and Daniel Susskind, http://www.susskind.com
An executive’s guide to machine learning, McKinsey Quarterly, June 2015, Dorian Pyle and Cristina San Jose, http://www.mckinsey.com/industries/high-tech/our-insights/an-executives-guide-to-machine-learning
Where machines could replace humans—and where they can’t (yet), McKinsey Quarterly, July 2016, Michael Chui, James Manyika, and Mehdi Miremadi, http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/where-machines-could-replace-humans-and-where-they-cant-yet
The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World, Basic Books, 2015, Pedro Domingos, http://www.basicbooks.com/full-details?isbn=9780465065707
Superintelligence: Paths, Dangers, Strategies, Oxford University Press, 2014, Nick Bostrom, https://global.oup.com/academic/product/superintelligence-9780198739838
Computational Legal Studies, https://www.computationallegalstudies.com/
Whether you like it or not, Artificial Intelligence (AI) is here – and it’s not only here to stay, it’s here to thrive. In a recent Hubspot-led survey of more than 1,400 global consumers, it was found that 63% of people who use AI technology don’t even realize they are using it. AI is that ingrained into our daily lives, both at home and in the office. Now, imagine the doors you could open (quite literally, in fact) through the conscious and purpose-driven use of AI.
Where does AI exist now?
If you own a smartphone, shop online, or chat via messenger with a customer service rep – congratulations, you are a user of AI! Voice recognition and search assistants (like Siri or Alexa) are available on 3.9 billion Apple, Android and Windows devices being used worldwide. Over 4 billion people globally are using messaging apps.
The White House recently released a report on the current state of AI and its potential to help address major challenges society faces.The way we live, connect and search on a daily basis is completely transforming- and it’s just the beginning.
Into the Future
Changing the way we use technology on a personal basis also means enhancing the way we do business. Integrating artificial intelligence into the workplace holds untold potential to increasing efficiency, certainty and productivity in our work. But what does it mean for contracts professionals?
We are seeing it rise up in the contract management space, making data extraction painless for legacy contracts and providing faster and better insights into contractual data. It’s going to change the way contracts professionals work on a day to day basis, ultimately affecting both their business and their career.
What are you doing to get ready for AI? Join us for a webinar with IACCM on Tuesday, February 28th as we explore the history of AI, what it means for contracts professionals and how you can develop a plan to take advantage of this game-changing technology.
Historically, businesses have struggled with successful adoption of Contract Management systems across their entire enterprise. Often times, only a small department will use the system around their specific processes, leaving other areas of the business in the dark. While this may increase process efficiency for one group, it does not solve the issue of contract certainty across all disciplines and all contract types.
The problem is that in the past, Contract Management has always been an extension of another solution (ie ERP or CRM). The systems also relied heavily on customized workflows, as they focused more on contract processes instead of the contract itself. These systems have failed adoption for various reasons, such as:
- Lack of proper visibility across the entire enterprise
- High risk of duplicates due to multiple systems for each department
- Complex customization for each users requirements
- Fragmented process of managing and storing data
Exari has taken a completely different approach to Contract Management from the start. We think of contracts as golden sources of data for your business, not just a trigger for a workflow. We offer a stand-alone Enterprise Contract Lifecycle Management Platform, NOT a thrown together feature spun off of an ERP or CRM. The Exari solution allows all disciplines within an enterprise to leverage the system without forcing them into an unnatural process, or make them duplicate their efforts.
Legal can stay in Word, Sales can stay in their CRM, Finance can stay in their ERP-but while still continuing to leverage the system. Having a centralized platform that can seamlessly share data with other systems across the entire enterprise has proven to be CRITICAL for adoption.
Stop siloing your data and increasing maintenance costs for fragmented processes. Join the 21st century and achieve 100% contract certainty across every contract type in your business with Exari Contracts™ Enterprise.
This week, DerivSource interviewed Alexandre Bon, Senior Solution Architect at Murex, to discuss the growing needs of an Enterprise View of Data in Financial Service firms. He explains how it is essential in order to comply with both the FRTB and SA-CCR requirements, as firms need full visibility into client and trade data. By concluding Bon’s Q&A, here are the important steps you need to be aware of and follow in order to better comply with these regulations.
1. Improving communication between all departments will build a better enterprise view of risk and capital
By bringing departments together with full transparency into all information, regulation-related strategic decisions can be more efficiently built out. For example, by bringing together the credit, collateral management, treasury and trading departments, will link together how collateral management operates and how trading desks will price the effect collateralization of new transactions. In return, this will provide traders with the information they need to efficiently evaluate which entity they should execute a trade with.
Bon stresses the importance of full transparency into all data at an enterprise level view. Banks need to move to a real time view of their regulatory capital positions in order to properly comply with the FRTB.
2. The SA-CCR has an implementation deadline for many firms
The new standardized approach is scheduled to take effect January 1, 2017. This includes a comprehensive approach for measuring counterparty credit risk associated with OTC derivatives, exchange-traded derivatives and long settled transactions. For more information on what you need to consider in order to comply, you can find it here.
Since a deadline is quickly approaching, more and more firms are beginning to put budgets into place to either build their own system or evaluating enterprise solutions for adoption (take a read through our Build vs. Buy whitepaper for more information).
3. How to integrate departments and getting over that initial challenge “hump”
Integrating departments can be extremely difficult, as further discussed by Bon. It’s no surprise that he mentions the challenges that firms will face, such as how they all operate and run differently, their data sets are incompatible or out date or can be duplicated with inconsistencies. The worst of it- they have no central data repository. He mentions that some firms have built their own regulatory reporting systems on top of data warehouses, but they just don’t cut it.
Implementing a central data repository to allow for full visibility into all data and reporting for every department is essential. It will help establish clear data management processes for maintaining clear, consistent data across the entire enterprise. By moving toward an enterprise view, the information can be used to rationalize processes, understand which businesses are most profitable, and divest those that are not.
Firms will not only be in compliance, but looking further ahead they can develop enterprise-level risk tools for analyzing positions and capital data in a much more efficient way. Banks need to adopt a more innovative approach for dealing with the high cost of regulations, such as managing the total cost of trading. An Enterprise Contract Management System is just that approach.
To learn more about how an enterprise contract management system can help you reduce your firm’s risk, download our Contract Risk Playbook: Risks Hiding in Plain View, an advanced guide for corporate boards and senior executives today.
DerivSource is an independent information source and online community for OTC derivatives professionals globally, with a community of over 15,000 members globally.
*DerivSource, SA0CCR and FRTB: Compliance Drives Renewed Push for Enterprise Data Management. 2016. http://derivsource.com/articles/sa-ccr-and-frtb-compliance-drives-renewed-push-enterprise-data-management-0
It was a beautiful afternoon in Boston as Chief Compliance Officers from the area convened to discuss the changing role of compliance at their financial services firms. The venue, Top of the Hub, is situated at the highest point in Boston – amazingly appropriate given the conversation quickly gravitated towards visibility and the difficulty of transforming ISDA Masters & CSA’s into data that can be more easily analyzed and operationalized.
Conversation was lively with several topics resonating with all participants. A significant theme of the conversation was around the changing role of compliance within the business. Compliance leaders are now asked to sit at the negotiation table with clients and have become a key member of the team. With the regulators playing a more resident role in corporations, compliance has become a more visible component of daily activities. There was a general theme that the integration of compliance into the business functions has also integrated the role of Chief Compliance Officer.
When speaking about ISDA Master Agreements, many felt that this was an area for ongoing automation and restructuring. Specifically, the harmonization of the ISDA-related data would reduce cost and risk for many firms. The advent of tools in this area is an opportunity for the teams to improve their process. The process of collecting the ISDA detail is very manual today. Once automated, however, this data would better enable companies to address questions regarding most favored nation clauses and other contract call outs.
The general consensus is that there are many regulations for the buy side firms to cover. It is easy for things to fall through the cracks as many companies cannot cover all regulations with a SME. The attendees discussed that the maturing of the processes was key to success, with several recommendations offered. Three of these suggestions included:
- lobby ISDA collectively to request more structure,
- designate key staff members to be SMEs in areas of greatest concern and,
- agree on a standard CSA
The attendees discussed how to best direct their limited resources, thus being a main concern. One recommendation was to provide incentives to the organization for meeting guidelines. A detailed conversation was held recommending teams to review the operations logs on a regular basis to spot check for any opportunities open for improvement.
Firms at the table had many different types of risk: fiduciary vs. deposit risk, while some companies were faced with both risks and answered to multiple regulatory bodies, that often had conflicting recommendation or reporting. Additionally, the impact of international regulation was discussed as an area of rapid change that is also causing workload on these teams.
Overall, there seemed to be consensus about ways to improve:
- Implement a central repository for all important agreements
- Capture key contract terms related to risk and compliance
- Provide proactive visibility for business users that quantify the indicators they find most valuable
The event ended strong with many of the participants exchanging cards and committing to continued sharing of best practices. Many thanks to the participants for such a lively discussion and to Exari for hosting an amazing event!
According to The National Contract Management Association, 81% of members reported that finding their contracts was a major concern. Think about your own experience – have you ever needed to look into the details of a contract and couldn’t find the right agreement? For a small number of contracts this could be considered sloppy, but for more it’s dangerous and frankly puts your firm at risk of being blindsided at the worst possible moment.
Contracts are one of the most effective tools for managing risk, because they have legal teeth. Chances are your company is pretty good at drafting and negotiating contracts to protect your interests while still moving business forward, but what happens once the ink has dried? Do you have an effective system for capturing and storing the information within the contract? If you’re like most companies there’s a good chance you fall short. The most progressive firms we see simply store contracts on a central file share and add a spreadsheet with basic metadata.
If your firm is serious about risk management then finding effective ways to manage and deeply understand your contracts is essential. It means taking a fresh approach to contracts and transforming them from documents into data. If you’re not managing your contracts properly you’re bound to face some unwanted surprises. Surprises that might cost your firm millions of dollars, or worse, your job! This is why you need a plan in place for when a crisis emerges.
If you think your firm can do a better job at risk and contract management, you’re right! The first step is to implement a universal data model for all your contracts and then consistently populate that database for every new contract. This uniform and data-centric approach will provide your firm with real-time information about the risks, obligations and exposures your company has to a counterparty. This is just the first step to managing your contract data successfully in order to reduce the risk in your firm.
Here’s an action checklist you can follow to get you started:
- Review the ways in which contracts are tracked on a company wide basis, and the policies and procedures in place to use that data to hedge against and mitigate risks.
- Review the status of contracts, including any risk concentrations and interrelationships, as well as the likelihood of occurrence and potential risk.
- Design contract risk management policies and procedures that are coordinated and function as directed.
- Implement these strategies in a timely manner.
- Send a message to management that comprehensive contract management is an integral component of the firm’s strategy and business operations.
To learn new approaches that will provide you with real-time visibility, such as assessing your current situation to track interrelated risks and identifying the steps you need to take for implementing an internal risk management campaign, check out the New Contract Risk Playbook. Its an advanced guide for Corporate Boards and Senior Executives on how they can take an enterprise view on managing their contractual risk, which will improve operational excellence while reducing risk.
Even after eight years since the financial crisis, we are still seeing firms continue to recover and take critical steps to put strategies in place for improvement. Firms are focusing on reducing their costs, while increasing their ability to respond to the changing regulations around ensuring financial health.
In particular, our largest global financial institutions are required to implement Living Wills with Recovery and Resolution Plans to ensure visibility under extreme financial or market pressures, and worst case, regulatory plans should the institution actually fail. While today we see how this only impacts the defined Global 20, it’s critical for these and other institutions to understand their contractual obligations and risks under all scenarios. The work to gain this understanding and visibility can be complex, time consuming, and costly.
Additionally, firms are having to respond to changes in the reporting of OTC derivatives going into effect this year. In fact, one of my global clients is looking at ways to unwind their current contract data to parse out the required details for measurement, reporting and re-papering of OTC derivatives alone. It’s a big job for many of our clients that is just getting started.
However, the well considered and industry-tested Universal Data Model delivered by Exari will significantly accelerate these institution’s view into their risks and minimize costs to analyze and respond. Assets Managers can easily reduce the time it takes to capture and analyze trading agreements, IMA’s, CSA’s and side letters from months to just hours. The Model is already enabling our customers, like the one mentioned earlier, to significantly save time and money by managing this in house, rather than relying on outside legal resources.
The Exari Universal Contract Data Model for Financial Services is a game changer and is already being adopted by the industry leaders who want to accelerate the compliance process, minimize risks, and keep costs under control.
For more information on how Exari’s Contract Data Model, please visit our products page
I spent this week with our talented team in London and talking with leaders in both financial services and insurance. We’ve recently delivered a new Contract Model that enables companies to more effectively manage risk. Most of the leaders I spoke with expressed deep concerns about the risk embedded in their contracts- one top ten bank said “we have all the data, we just don’t know if it’s the right data”.
It’s a huge problem with contracts because so much of the data is interpreted. A limitations of liability clause might be 3 paragraphs in one contract and 1 in another and say the same thing. In order for the data to be used properly, it has to be interpreted and stored as data so it can be analyzed, correlated and used for decision making?
Why is this so hard? One customer outlined their contract management nightmare when they tried to use a document management, workflow, master data management and data warehouse to extract and report on contract data. Just keeping the systems in sync was a nightmare. After 3 years and $25m USD, they abandoned the project. What they have now is a very expensive electronic filing cabinet.
Contract “data” doesn’t really exist until it is interpreted and normalized; our Universal Contract Model (UCM) does that for companies and shows them a 360 degree view of their contracts. It’s real and it works. Now contract data can be valuable in managing risk across the enterprise.
Are you still drafting thousands of contracts manually? In Word? Or storing multiple versions of paper contracts in a filing cabinet? Well, you’re not alone.
Exari recently surveyed 92 Corporate Counsel and compliance professionals about their habits and challenges for contract creation, storage and legal technology. More than 75% reported that they were still creating contracts in Microsoft Word, using some form of “copy and paste” template, while only 1 out of 10 currently use a document generation software to streamline the process. Half of the participants (47%) said they were still using paper filing systems to house corporate contracts. Their top pain points included:
- Slow contract approval processes (59%)
- Little or non-existent insight into risk (39%)
- Missing key milestones (27%)
- Difficulty with internal collaboration (25%)
- Risk of error (23%)
With outdated practices for generating and storing contracts, you’ll lack complete visibility into all of your agreements, increasing your risks such as liability, being underpaid or overcharged and missing key milestones. By implementing an efficient contracting process, you won’t miss a step. Not to mention you’ll be able to pull information during a crisis in minutes, rather than taking hours to dig up and sift through multiple paper copies. Avoid missing renewal rates, reduce the length of sales cycles, streamline negotiations and increase internal collaboration.
Doesn’t that sound better than the ol’ “copy and paste”?