Contract management looks a lot different today than it did 12 months ago. New challenges are emerging and legal teams are constantly adjusting priorities to keep up. Other challenges that have always been a part of the contract management process have been exacerbated by the shift to a remote work environment. Contracts are coming under greater scrutiny and executives are looking for more in-depth insight into how each agreement impacts the bottom line.
In recent months, ContractWorks has surveyed legal professionals from around the world to get a better sense of how teams are changing their processes, which obstacles they’re running into most frequently, and what they’re doing to manage agreements effectively during unfamiliar times.
Below are a few of today’s most pressing contract management challenges, and some of the ways legal teams and contract managers are overcoming them.
Keeping up with contract deadlines
All of our recent research indicates that keeping up with contract deadlines, a challenge that certainly isn’t new, is still a major cause of concern for contract managers. And it’s likely going to remain a key challenge for anyone relying on manual methods to monitor agreements moving forward.
In an exclusive survey of in-house lawyers and corporate legal professionals across the UK, commissioned by ContractWorks and conducted by Censuswide, 56% of respondents indicated that their organization had missed an automatic contract renewal. And the financial impact of those missed renewals was not insignificant. The average value of these auto-renewing contracts equaled £41,473, and one respondent noted that a contract over £250,000 was unintentionally renewed.
In a ContractWorks survey conducted earlier this year with our network of contract managers, general counsel, and others involved in the contract management process, keeping up with contract deadlines and milestones tied as the top answer for the most significant contract management challenge currently facing respondents (more on the other top response below).
Monitoring post-signature contracts has always been a burdensome task for those without the systems in place to streamline the process. When you combine that with the fact that many businesses weren’t prepared to shift to a remote working environment, it’s easy to understand how granular contract details get overlooked.
Managing contract risk
With so much emphasis on using legal tech to solve for pre-signature contract tasks - like drafting, negotiating, reviewing, and approving agreements - it makes sense that 71% of respondents in the Censuswide survey believe their business doesn’t focus enough on managing post-signature contracts. The top concerns that stem from this include financial risk and other organizational risks, typically resulting from missed auto-renewals and contracts that end without anyone’s knowledge.
The ContractWorks survey revealed that close to 40% of respondents are more concerned with managing contract risk now than they were prior to the global events of 2020, and over 46% say their business is more concerned with managing and reducing organizational risk.
Because of this shift, many are now prioritizing contract management solutions that automate contract tracking and reporting, allowing for users to reduce the chances of major milestones going undetected.
Reporting on contract details and performance
When problems arise - like losing sight of contract details or operating with an unacceptable level of risk - it’s natural to take measures to solve those issues in the future. Contract reporting is one way to address both of these problems (and others), but putting an effective reporting process in place is easier said than done. And if your contracts aren’t stored in an online repository, reporting on contract details and performance could be a near impossible task.
According to the ContractWorks survey, over 50% of respondents indicated that reporting on contract details and performance and keeping stakeholders informed was one of their top three contract management challenges at the moment.
Additionally, 46% of respondents in the Censuswide survey said that adopting legal tech would help them improve visibility and post-signature contract reporting. Legal tech adoption should continue to increase as departments isolate their greatest challenges and find the solutions designed to address those specific pain points.
Remote access to contracts and details
It’s not surprising to learn that remote contract access is a significant issue for today’s corporate legal departments. While many organizations have expanded their use of technology in the last 10-plus years, contracting is still a paper-heavy process. For those who were unprepared for a sudden shift to a remote working environment, it’s likely that there was a period of time when they couldn’t immediately access documents or details that were critical to running the business.
Remote access goes hand-in-hand with maintaining contract visibility, and losing visibility leads to significant consequences.
According to the Censuswide survey, the top concerns of losing visibility into contracts include the following:
● 38% said financial risk to the organization from missed terminations
● 32% said impact on productivity and effectiveness
● 24% said reputational risk to the team and organization by not being able to find key information
And as alluded to earlier, remote access to contracts was tied for the most significant contract management challenge (along with keeping track of deadlines), according to the ContractWorks survey.
As businesses around the world determine how to structure their teams and balance remote and on-location positions, it’s clear that the need to maintain access to contracts - regardless of location - will be a requirement for any effective contract management process.
Overcoming Top Challenges
Anyone involved with the contract management process knows how challenging it can be to do your job effectively in today’s business environment. Executives expect greater insight and visibility into contracts that impact the organization, stakeholders want immediate responses to their questions about the details of agreements, and remote working environments make these tasks even harder to accomplish.
The good news is that even though the legal tech needed to perform this work efficiently isn’t in place for every organization, more teams are realizing how critical it is to invest in the right solutions.
According to the ContractWorks survey, of those without contract management software, over 70% are more likely to adopt new technology to help manage contracts after the events of 2020, with nearly 50% looking to adopt dedicated contract management software.
Other technology solutions on the radar for businesses in 2021 include electronic signature, collaboration tools, secure document repositories, and vendor management software.
For more on determining what kind of technology will help you solve your biggest contract management challenges, download The Buyer’s Guide to Contract Management Software, which includes a contract management software selection checklist.