The fact is, contracts are the heart of how your business mitigates risk and increases growth. Using the right processes will help protect you—and your organization from liability.
Contracts serve multiple functions. They’re also the DNA of a company—vital to the success and growth of every type of business.
Don’t get stuck with unnecessary risk. Whether it’s in the drafting, or negotiation process, mitigate problems with these best practices.
Risk Management Best PracticeBest Practice #1: Create Transparency
Lack of transparency is a recipe for errors: from frustrating scope creep, and revenue loss, to contract clause errors, and increase costs.
Errors are never deliberate, but deliberately eschewing a system that allows you more transparency is a mistake. The errors then become burdens that cause unnecessary lag and disruption to your business deals and processes.
Contract errors are difficult to enforce, can be difficult to fix, and can end in canceling a crucial contract altogether.
- Transparency means that vague language is reviewed and replaced with more specific, agreed-upon language.
- Clear-up any misunderstanding in how you use terms by creating clear definitions of key terms.
- Identify every risk scenario and define it clearly for your business, and where the risk originates: whether as a point of regulatory compliance, or from a third-party.
Risk Management Best Practice #2: Review, and Review Again
Review begins with clarifying misunderstandings, and defining terms so that everyone’s on the same page. However, it means creating a clear, audit-able trail of the negotiation process, too. So that you have a running summary from which you can test every area of a contact, and all your contracts, for accuracy, and clarity.
- Are rights and responsibilities clearly defined?
- Do you agree on the soundness of confidentiality terms?
- Are indemnity clauses clear and complete?
Then, be sure to clearly define, and review how and in what ways risk transfer is appropriated.
Risk Management Best Practice #3: Qualify Risk Transfer
This is a higher-stakes area in contract risk management and contract negotiation. When you consider risk transfer, you’re considering loss and how that loss is insured—not just for whom. Harvard University advises to transfer risk in a number of ways:
- Financially – To offset all responsibilities, or to share this as a means to limiting revenue loss.
- Indemnity terms – Negotiate indemnity terms that hold you, and your business harmless from any legal consequences and that merit compensation.
- Liability terms – Conversely, guard your organization against risk with a sound wall of liability limits.
- Subrogation waivers – By and large, insurance is a main route to waiving subrogation rights in any loss. Closing any gaps in risk by upping commercial insurance, adding riders and naming third-parties is a must-do step to support your contractual waiver terms.
Contract Lifecycle Management- Automate the Process to Decrease Risk
Concord is at the forefront of contract lifecycle management software. A CLM addresses the central issue of contract risk by engendering collaboration in the contract negotiation and management process, to up transparency.
This opens up channels of communication between colleagues, external stakeholders, and third parties.
Some of the key features provided that help optimize contract collaboration and communication to reduce risk are:
- Versioning: In Concord, new versions of contracts are saved and displayed in chronological order next to the corresponding document. These records are permanent, and cannot be tampered with or altered. Concord keeps all versions clearly marked and centrally stored. This feature allows all parties to quickly and easily see that they are working on the most up-to-date version as well as the evolution of past changes to the document.
- Discussion Panel:Concord’s discussion panel provides an in-platform messaging space. Having a discussion built into the contract platform itself eliminates the need for back-and-forth by email. With Concord, the discussion panel is always attached to the contract for reference as contract terms are discussed.
- Collaboration Across Teams:Concord provides a central hub through which colleagues can collaborate together to produce a document draft. A single draft can be worked on easily in real-time, with accurate records of document versions and changes. After the draft is complete, it’s simple to invite external stakeholders to negotiate within the Concord platform.
- Approval Workflows: Concord allows each document to have its own Approval Workflow in order to ensure the appropriate team members are alerted to act at the appropriate juncture of the negotiation workflow. This greatly simplifies the collaboration process by automating and mapping out the actions needed to approve a document.
- Clause Alerts: What’s more, users can configure clause alerts for specific events in the contract lifecycle, such as advanced notice of termination and contract renewal dates. Concord will send automated alerts via email in advance of and on the date of a clause deadline, allowing users to appropriately prepare needed actions. Alerts ensure that crucial actions will not be missed or forgotten about, and keeps all parties involved and informed.
Eliminate back-and-forth contract management across different systems, and communicate in one single place. With a CLM, the entire contract processes can be simplified, reducing risk and increasing transparency.
Founded in 2014 and headquartered in San Francisco, Concord enables over 200,000 companies around the globe to connect all their people, processes, and contracts in one place. Built with intuitive features—like online negotiation and editing, deadline alerts, and approval workflows, Concord gives users everything they need for the entire contract lifecycle, making growth and compliance synonymous.