Let’s talk about the elephant in the room first. It is the problem of managing large volume of contracts efficiently, effectively and proactively at an enterprise level. Many of you might not have even heard about it (the problem), seen it or just seen merely one of its body parts like a tail or trunk!
Contracts, be it buy side, sell side or internal ones, are at the core of an enterprise. Their governance ideally is a part and should be a part of the larger Governance, Risk and Compliance (GRC) function. However, most organizations have these responsibilities distributed across functions: Procurement and Sourcing, Legal and Regulatory, Finance, Operations and Risk Management with very less collaboration. Lack of governance of these thousands of contracts does not only erode commercial value, impact operational performance but it can have serious reputation ramifications in complex regulatory frameworks. The risk is never visible at an enterprise level because different functions are working in silos and there are very few (if not none) good Contract Management tools that offer visibility.
Ask any executive leading the GRC function or someone with partial responsibility for one or more aspects and he is often found clueless about very basic questions about these contracts lying somewhere. These executives rely heavily on their subordinates who actually manage, in fact have horrible time juggling through interdepartmental responsibilities and assigning specific stakeholders. They are the only ones who have visibility into the contracts (varying from 1-5) that they are responsible for. It is like an organisation is travelling from place A to B through these contracts (read vehicles) and the overall drivers (read executives) are dependent on the visibility of just next 20 meters afforded by search lights (read Contract Managers) during the night for reaching a place from C to D. Nevertheless, the challenge remains to align the entire C to D vectors (read compliance) along the path A to B. Here, the executives face a tremendous challenge in steering the organizations towards larger GRC goals. At the root of all this is visibility and it is not afforded by most Contract Management tools in the marketplace. In other words, a good Contract Repository with useful actionable intelligence is an essence of any Contract Management tool and almost all tools lack it.
In most of the tools, contract documents are scattered all over and you need to find all relevant documents related to a particular Supplier/Customer from different folders. Further, most tools do not have:
Vendor/Customer hierarchy and classification that enables governance, risk and compliance roll up at an Enterprise level
A well-defined listing/folder structure at Supplier or Customer level,
A Document tree structure to offer wholesome view for a particular Supplier/Customer at one place and useful references/linkage capability,
A capability to maintain active, relevant and operational documents with Audit trails,
A document viewer with the capabilities to highlight relevant text,
A contract summary (read metadata) to support useful analytics,
A snapshot of all business critical actionable intelligence
A reporting and scheduling capability,
An advance search capability within the documents,
A standardized Naming Convention and
A plethora of customizable filters enabling required drill down to reach the relevant information.
No wonder then, the elephant in the room in not visible in the first place. Taming the elephant i.e. compliance of Obligations by specifically assigned stakeholders, managing change, tracking performance and financial management comes next…stay tuned in for more!