Your contract assets are the backbone of your business. They provide revenue certainty on the sell-side and supply chain certainty on the buy-side. Your contracts touch virtually every business relationship and shape your exposure to risk. But how well do you understand them?
Contracts present unique challenges to most enterprises: some small, some catastrophic. Your job is to understand which contractual problems are doing the most damage – in terms of lost revenue, inflated costs, or unmanaged risk – and to eliminate those problems as efficiently and effectively as possible.
What you don’t know can hurt you…badly.
If you don’t have fingertip access to contract data – data you can trust – how can you really understand, measure and mitigate the risks buried in the fine print of your portfolio? How confident are you that none of your contracts has a ticking time-bomb of uncapped liability waiting to go off? Are there any unexpected chain-of-title gaps in your core intellectual property? Have any buy-side OEM contracts expired, putting an entire product line at risk? Poor visibility into contract terms is a frustrating reality for many businesses. But can you really afford not to know?
Legal bottlenecks…where deals go to die.
When legal is tasked to review every contract – and the quarterly sales crunch is on – some deals won’t make the cut, and revenue will suffer. Unfortunately, unless legal finds a way to work faster or smarter, or to empower the business with self-service contracts, they will eventually develop a serious problem. Legal will become known as the place “where deals go to die” or “the deal prevention department”. This is an image most hard-working legal teams neither want, nor deserve.
The many and varied risks of rogue contracting.
When contracts don’t flow through legal – and controls are loose – your deal-flow may improve, but at what risk? Particularly for junior and newly hired members of the sales team, it’s impossible to catch every risky clause, and to include all the wording that shields you from potential liability. Without some controls, you might get locked into to a five million dollar project for a fixed fee of one million. Or you might give away a big chunk exclusivity with no termination rights. With so many people negotiating in so many different ways, it becomes virtually impossible to understand your overall exposure.
The tragedy of revenue leakage.
Poor tracking of price, payment and renewal is the easiest way to squander the favorable terms you fought so hard to win during negotiations. This is tragedy of revenue leakage. You worked like crazy to win the deal, only to miss the renewal. You negotiated annual price adjustments, but nobody told the finance team. Across a large portfolio of contracts, these seemingly small lapses of contract management can create large revenue holes.
Contracts, compliance and headline risk.
In a world where trust and reputation play a big role in corporate value, can any business afford any lapses in contract or regulatory compliance? At a minimum, failure comply with your contractual obligations will disappoint your customers and expose you to claims of breach. In many industries, failure to include appropriate clauses can lead to regulatory sanctions and penalties. And in the court of public opinion, a reputation of poor compliance can seriously damage your brand.