The challenges to legal teams are leading to missed deadlines, lost opportunities, and unacceptable levels of risk for organizations, including security and compliance risk.
To gain an insight into the complexities, Digital Journal spoke with Eric Laughlin, the new CEO at Agilof. Laughlin breaks down the key risks exposed by remote work and how cloud-based, automated contract management can help legal teams.
Digital Journal: Enterprises, especially legal departments, have always been concerned with risk. Is there more risk in a COVID world?
Eric Laughlin: There is much more risk for enterprises, especially for those who have manual processes, or manual steps in their process. There is a growing concern regarding the need to better manage risk and protect the company. This is driven by fear of the unknown, such as a data breach, signing outdated contracts, or missing deadlines. These are everyday contract management issues that every department struggles with. These issues existed a year ago, but people could still make it work by popping into someone’s office or grabbing them in the breakroom. Manual contract management is not an option in the new world.
DJ: What are some of the risks the current business environment poses for enterprises?
Laughlin: With the switch to a remote workforce, many legal teams have been forced to rely on convoluted and outdated systems to manage contracts and legal agreements. This has led to missed deadlines, lost opportunities, and unacceptable levels of risk for organizations, including security and compliance risk. Most companies have too many contracts in play to quickly and accurately assess which ones pose the greatest risk.
The quick transition to a distributed workforce meant organizations had to first “find their contracts.” This opened them up for revenue loss, or excessive spending, as well as data security issues if contracts were located on desktops or local drives. Now is the time for organizations to digitize and improve their technology to better manage contractual risk.
In addition, with the social and political upheaval over recent months (and turned up even more in the last weeks), there are additional risk factors. Companies are being forced to take sides in very sensitive and important controversies (see Twitter, Facebook, Amazon, etc). The ramifications of these decisions are real, from boycotting to litigation to potential malicious acts against the company.
Every corporation should be finding out how their contracts support their ability to cancel service based on the actions of your customer, or to void a contract based on the actions of a vendor.
DJ: How does a contract lifecycle management (CLM) system mitigate risks?
Laughlin: Automating the entire CLM process helps companies in a number of ways. First, CLM provides a central repository that gives internal departments, such as sales and procurement, immediate access to agreements online. When COVID-19 hit, the global supply chain was immediately impacted. Having a CLM system in place was critical for legal departments that quickly support the procurement, production, services, and sales organizations to determine legal options by pulling all contracts and invoking force majeure clauses as needed.
A CLM system provides standard contract templates and approved language, which dramatically reduces compliance risk. Risk is also reduced thanks to automatic reminders for approvals, expiration dates, and escalations which ensures things don’t fall through the cracks. The ability to electronically sign contracts also makes the whole process much more efficient, especially with everyone remote and in different time zones.
DJ: What are everyday contract management issues that every organization struggles with?
Laughlin: The majority of business-to-business transactions are set contractually, and thus every organization is constantly dealing with an increasing volume of contracts. This can put organizations with smaller legal departments at a serious disadvantage when they are unable to handle the growing number of contracts that they need to review to keep business moving forward each day. This where a CLM system can help.
For better productivity, employees across the organizations need to be able to easily generate contracts with little to no legal assistance and use CLM to track the progress and status of all individual contracts. For this to work seamlessly, businesses need a customized CLM system that fits each one’s unique business structure and processes. It’s no longer realistic or efficient for enterprises to use giant file rooms or tedious Excel sheets for contract management as they did two decades ago. It’s important to invest in technology that can automate the contracting process and overcome the challenge of managing the lifecycle of thousands of contracts at a time.
DJ: What is your advice for those who are in the market for a CLM system?
Laughlin: My advice is look for a platform that can evolve with your business needs as your business grows and evolves. An effective CLM system must be agile enough to scale with the organization over the next 10+ years and its changing needs. If the CLM platform isn’t flexible and completely tailored to the organization’s specific challenges during that growth period, the company will be forced to roll out a completely new system every couple of years, or live with a system that holds back their commercial success. Plus, it’s key to choose a platform that integrates with other enterprise software such as Microsoft Office, Salesforce, and Adobe. With the wrong approach, organizations can become boxed in with an outdated, rigid CLM approach.
If you are in the market for CLM, the best way to begin your search is by viewing materials from third-party research firms like Gartner’s Magic Quadrant for Contract Lifecycle Management or Gartner Peer Insights, which is based on customer reviews. This ensures you’re evaluating solutions based on real customer experiences and lessons learned from CLM implementations, enabling you to make informed decisions for your organization.