Category: Contract Lifecycle Management
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.
Is your team ready for the new international revenue recognition standards? Chances are you’ve got a small army working on this problem, but how will your business be affected? Are you on track or behind? Is there risk that your policies, procedures, and systems are not going to be ready in time for compliance? Even the most forward thinking businesses acknowledge that they’re on a journey to find the best methods and systems for institutionalizing best practice into their accounting departments.
We’re sprinting towards compliance, yet recognizing your company’s revenue is a crucial and complex, and the spotlight is on your team to get it right. If you’re interested in a refresher on the standards and a high-level survey of what your team needs to be working on, we’ve prepared an e-Book on what every Executive needs to know about these standards.
The current requirements for recognizing revenue in the United States are the Generally Accepted Accounting Principles (GAAP) and are viewed as overly complex and fragmented. The International Financial Reporting Standards (IFRS) have also been criticized for not providing enough guidance. For these reasons, the new International Revenue Recognition Standards were created to standardize the way revenue is recognized across all organizations globally.
With a 2018 effective date, the clock is ticking for companies to begin to wrap their head around what it means for them, and what they need to do to begin preparing. Although it will take time to evaluate the most efficient way to transition to these new standards, in the long-run it will make it much easier for companies and industries to compare financial statements- if widespread adoption unfolds. This new standard will actually help companies gain deeper insight into their contract data. Some data, in fact, that is buried within complex contractual agreements that could cause major risk unless you uncover them with a contract management platform.
Companies must understand how these standards will impact them, what needs to be done to prepare for a new process, and finally, how to evaluate, implement and adopt an enterprise-wide solution.
In this three-part blog series, we will walk through what Executives need to do in order to prepare as soon as possible. There are three steps to success for this process.
Step 1: Assessment
When first understanding the new guidelines and how they will specifically apply to your transactions, you’re likely going to run into some challenges along the way. Having an initial assessment of your business will 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.
What to consider during your initial assessment:
- Look at how the new standards will affect your operational and performance metrics
- Perform a technical assessment of revenue transactions
- Determine the impact on miscellaneous aspects of your business
- Form a team from different departments to identify any ripple effects
- Analyze how existing contracts would be recorded under the new standard
2018 is less than a year away, and this isn’t something that can be transitioned overnight, or even over a month. Start the process today by downloading your free e-book now to help you get started.
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.
Here’s a strange comparison for you: contracts are like concrete. But what do legal agreements have to do with building materials?
Think about a concrete foundation. If a foundation isn’t rock solid, whatever is constructed on top of it could collapse without warning-the same is true about any company. A business is only as strong as the contracts it’s built upon and its ability to fully understand and comply with those contracts. Things like weak liability and intellectual property protections, missed contractual milestones, inadvertent breaches, and misunderstood termination for convenience clauses are all recipes for disaster.
What if your company could eliminate that unpredictability and achieve total certainty over what’s inside 100% of its contracts? At Exari, we see this as a simple three-step process.
Step 1: Gain visibility into your existing portfolio of contracts.
Whether your company has dozens of contracts or thousands of them, it can be nearly impossible to keep track of every single requirement, restriction, and deadline. When your company’s revenue and reputation are on the line, staying ahead of your obligations and out of breach is imperative. But how could you do this without having to read every clause in every contract?
The answer is simple: Turn your documents into data. When contracts are imported into the Exari system, the most important clauses and information are pulled from the document, allowing business users to visualize and analyze this data in seconds with the help of dozens of standard reports.
Step 2: Gain visibility into your contractual risk.
Every contract contains several important risk factors…termination clauses, IP protections, payment terms, liability limitations, etc. Could you assess precisely how much risk is contained in a particular contract? How about the risk contained in your entire contract portfolio? Unfortunately, for many companies the answer is “no.”
That’s why Exari created a revolutionary algorithm that analyzes more than 20 specific contractual data points, determines the contract’s risk to your organization, and assigns it a simple risk score. And since these scores are based on a uniform set of data, you can compare apples-to-apples and fully understand the risk (or lack thereof) across your entire enterprise.
Step 3: Gain visibility into your contracting practices.
The easiest way to make sure that your company is creating low-risk agreements is to develop a standard procedure that promotes good contracting practices and prevents so-called “rogue contracting”. The question then becomes, how do you both tightly control your contracts while still providing the flexibility necessary to prevent legal department bottlenecks?
Exari’s DocGen™ allows all business users to do just that with an innovative and streamlined document automation system. Using a simple question and answer “Wizard” interview, DocGen™ lets any user create pre-approved, ironclad contracts, while integrated workflows loop-in the correct people, as needed.
Achieving 100% Contract Certainty™ has never been easier for businesses large and small. Think of it as reinforcing your wobbly foundation. You’ll be glad you did.
And since a picture’s worth a thousand words, please take a couple minutes to enjoy our newest video “100% Contract Certainty.”
At Exari we’re always innovating. Coming up with new strategies for making our customers’ experience even better is an obsession! We get the chance to talk with hundreds of companies about the contract creation process and we are consistently asked for help in making it more streamlined. A primary benefit of a contract management solution is breaking up the many steps involved in contract drafting, negotiation and execution processes so they can be more easily automated- freeing up more time for you to get back to important tasks. In addition to helping you easily generate contracts and better manage them, we are also surveying the market to understand what tools will help provide our users to continue to ease the contracting process.
After integrating with DocuSign at many customers, we’ve decided to formalize our relationship and establish a formal technology partnership. We’ve digitized the contract creation process from the beginning to the very end, sealing the deal with DocuSign’s eSignature and Digital Transaction (DTM) Platform. Our users can now enjoy the ease of contracting with Exari while using DocuSign’s secure, cloud-based platform for signing agreements instantly.
We can already see the value that DocuSign is adding for our customers. Now, users can accelerate their sales cycle and revenue error free, by eliminating the manual efforts of signature by being able to sign anytime, anywhere and on any device. This will not only increase customer satisfaction, but also keep you worry-free about contracts getting lost in the mail or being buried under piles of other documents.
To hear more about all of the benefits both Exari and DocuSign’s eSignature can offer your business, contact us now to discuss further or see a preview!
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.
Last week, Exari teamed up with IACCM for an insightful webinar to explore the meaning of “Contract Certainty” and how you and your business can work towards achieving it. Attendees also got a look into our Universal Contract Data Model™ and what’s in store for the future with the newly announced CMA Contiki and Exari combination.
Exari’s Founder and Chief Product Officer, Jamie Wodetzki, kicked off the webinar with how you can begin to eliminate contractual uncertainty, like contracts that have expired, risks buried deep into the fine print and gaps in the paper trail. He addressed Revenue, Supply Chain, Process and Title Uncertainty, and the risks associated with each.
With all of the potential risks that live within your contracts, it’s crucial to have an enterprise view. This will allow you to constantly keep track of your businesses relationships with vendors, customers and trading counterparties. By having complete insight into all of your contractual data, you also gain an enterprise view of your business’s risk, the contractual risk score and a breakdown of where it lives. For example, your customer risk score might be lower than your liability risk score, giving insight into which ones you need to dig deeper into and work on.
Mike Maziarz, Exari’s VP of Marketing and Product Management, closed out the webinar with how we’re allowing our customers to move towards 100% Contract Certainty™, with the help from our Universal Data Model™. Mike also commented on the exciting Exari and CMA Contiki merger and how we complement one another to strengthen 100% Contract Certainty™ even further. If you haven’t watched the webinar recording yet, I won’t ruin it for you!
Click here to receive your copy of the webinar recording today!