The potential for contract risk is everywhere in the contract lifecycle…from missed deadlines to compliance issues and costly errors. Without a structured approach to managing contracts, organisations can quickly find themselves vulnerable to various risk variables that threaten financial stability, operational efficiency, and more. F
Fortunately, contract management software offers a myriad of tools to identify and mitigate these risks – keeping organisations on track and compliant. Let’s explore four common types of contract risk and how leading contract management software can help mitigate them, virtually ensuring smoother operations and peace of mind.
1. Financial risk
Financial risk is the potential to lose money on an investment or business venture. Organisations can see financial risk from value leakage, contract negotiation mistakes, and missed deadlines. Financial risk can result in the loss of capital, reduced cash flows, and diminished profitability.
To combat financial risk, contract management software’s standardised templates, auto-redline functionality, and clause ownership/locking can help ensure that you retain the best financial terms when contract execution and signatures occur. Workflow configuration with task alerts can ensure you don’t miss a renewal deadline – instead you can take time to proactively report on and analyse financial trends and terms before making a decision on renewal or renegotiation.
2. Legal risk
Legal risk can come from a breach of contract or failure to observe regulatory obligations.
To avoid breach of contract relating to obligations – the delivery of goods and/or services per a contract) – you can leverage intelligent workflow automation with key dates and task escalation to ensure tasks are performed on time according to a rules-based sentiment. For managing regulatory risk, you can maximise standard templates and clauses to ensure that all language around compliance and regulations is ironed out and understood.
3. Security risk
A breach of contract data security can result in data leakage, security risk, and reputational damage to your organisation. Leading contract management software is SOC 1, SOC 2, and Privacy Shield compliant – among other security attestations. It also provides you and your users with multi-factor authentication for an extra layer of security when logging into the system. Trusted contract management software also gives you the ability to configure necessary user- and user-group-level permissions down to metadata field and report specificity.
Contracts can be easily found and stored in contract management software. Leading solutions offer you unlimited storage, and you can search for documents down to the field and term level with saved searches, search history, and ‘Did you mean…?’ functionality.
4. Operational risk
The fourth type of contract risk is operational risk. Operational risk can arise from daily operational activities, such as errors in data entry, inadequate contract management, or inadequate monitoring of contract performance. Leading contract management software supports automated data extraction from contracts into a tidy contract record screen with organised metadata fields with a variety of formats. This tool can greatly reduce instances of data entry errors on your team, since contract management software does it for you.
Features of Contract Insight from Four
Contract Insight® contract management software allows you to:
- leverage generative AI for proactive contract clause and template generation and risk analysis
- securely store an unlimited amount of contracts within a contract repository
- create custom and ad-hoc contract management reports (great for proactive operational risk management)
- increase visibility with contract management dashboards and calendars
- track contract financials to control contract spend and manage contract budget
- supercharge contract drafting with pre-approved templates and clauses
- leverage AI-based contract data extraction, field mapping, and clause matching.
- enhance contract collaboration and contract redlining
- expedite contract approvals and contract signing with integrated eSignature software.
Optimise contract performance with Contract Insight®
Robust contract performance management with detailed CLM data analytics oversight begins and ends with Contract Insight and is enhanced by use of the right metrics. Book a free demo of Contract Insight® contract management and eProcurement software today.
Contact John O’Brien, CEO at Four Business Solutions – global business consultants and software integrators specialising in business process improvement.
