In the complex business landscape, the management of contracts has emerged as a pivotal element that can ensure contracting is optimized and significantly impact an organization's success.
An Integrated Law™ approach between the business and those delivering legal and contract services is vital for success. This approach allows legal and contracts delivery teams to make more strategic decisions across the day-to-day legal and contracts minefield and allows senior in-house legal teams and business stakeholders to focus on value creation initiatives and not be distracted with compliance and risk management in-life contract management activities.
The integrated process of contract management extends far beyond the initial signing of agreements; it encompasses a real-time, proactive and enduring strategy known as "in-life contract management." This strategic approach not only safeguards the interests of the business, but also holds the potential to improve margins and foster revenue generation.
When one elevates true in-life contract management to the forefront, it becomes a business enabler, supporting businesses throughout their contract lifecycle and contract ecosystem journey. It opens the door to legal and contract delivery teams becoming a force multiplier in improving businesses’ risk and financial position. Legal and business stakeholders working in harmony, utilising technology and process methodologies to its maximum -- that is when contracts prosper.
In this article, we delve into some of the essential aspects of in-life contract management.
In-life contract management refers to the continuous oversight, analysis and adaptation of contractual relationships throughout their lifecycle. Unlike traditional contract management, which tended to focus on the pre-signing phase, in-life contract management addresses the challenges and opportunities for organizations that arise after agreements have been executed. In every part of the contract lifecycle, there is a dollar to be made, saved, won or lost. It is imperative that businesses stay focussed on maximising their risk and revenue profile at all times.
Delivering on this Integrated Law vision for organizations is the very practice of maximizing, in every transaction, the value residing in every part of the contract and its lifecycle.
Three key focuses of in-life contract management:
This approach is underpinned by the recognition that contracts are alive and need to be actively managed. It is not merely a “once and done” transaction or static document (“that sits in the drawer”), but rather a living entity that requires care and proactive management to ensure compliance, risk mitigation and value realization.
Business stakeholders are acutely aware of the potential risks and rewards associated with contracts because of links to key business drivers such as revenue. How often do we hear the phrase, “It’s stuck with legal”? Speed of contracting and ultimately supporting businesses throughout the contract lifecycle journey efficiently is key. If it takes six months to close a simple agreement, all parties have failed. Business stakeholders want confidence that those providing legal and contractual support fully understand their needs, business drivers and goals.
In short, the business seeks assurance that their contracts are being managed effectively to protect their interests, enhance profitability, and drive revenue growth.
The methodology of approach is simple, based on previously agreed precedent – presented in a clear and consistent way:
This allows exceptions approval to be efficiently documented, validated and managed. Speed of contracting (in-year revenue) is then increased based on the better understanding of the evolving businesses’ known appetite and tolerance to risk – reducing the tension between legal and business stakeholders and focussing risk reviews on issues that truly matter.
This approach to contract management yields undeniable value – so, how can organizations implement it? Simple: by integrating the contracting function across compliance, risk management, value realization, revenue/margin optimization and workplace efficiency.
OK, not that simple in reality. But this in-life contract management partnership ethos nurtures the ability of contracting to become deeply integrated. Business pain is shared pain. This is only ameliorated by legal and contract teams tirelessly working and integrating with business stakeholders to better understand their goals in order to support them and find solutions to day-to-day business challenges.
In practice, this type of integration is evident across critical business objectives:
Compliance: Business stakeholders want to be assured that their contracts are being rigorously monitored for compliance. That their business professionals have full visibility into where they are in the contract lifecycle journey, and that the next 6-12 months’ delivery has been carefully planned and mapped out.
This can involve tracking key milestones, obligations and deadlines to ensure that all parties are fulfilling their commitments as outlined in the contract. Witha clear understanding of contract performance, stakeholders can take swift corrective actions if deviations occur, thereby minimizing potential legal disputes and financial losses. Many organisations already have a means of tracking obligations – be it a spreadsheet or sophisticated tool. But tools are only as good as the process put in place to manage the obligations.
Obligations management does not happen automatically. Software needs to be managed. Data integrity needs to be maintained. Decisions need to be made based on the data presented. An automated bot can, of course, chase for an update --even report and categorise it. But if no one acts on the data presented, then automation will have provided limited value.
The value in-life contract management brings with respect to tracking obligations, is not just ensuring obligations are ingested meaningfully into the clients chosen obligations management tool. But it is wider, also ensuring the managed software solution provided has the necessary and adequate controls and processes in place to monitor, act and propose recommendations based on actively managing the identified and agreed contract obligations.
Risk Management and Mitigation: Contracts always come with inherent risks, ranging from legal liabilities to operational challenges. But risk management is about putting in place adequate controls and processes to manage the residual risks -- the risk that remains after we have done our day job. In-life contract management provides a structured, comprehensive risk management approach. It promulgates a strategy that actively identifies, assesses and mitigates potential risks. Active in-life contract management with respect to residual risk management involves developing and managing risk assessments, tracking compliance, ensuring that risk mitigation plans are in place and actioned, and that the organization is adequately protected against adverse events.
By demonstrating matter oversight mastery, legal and contract management delivery teams ensure business stakeholders have access to up-to-date data when making key business decisions (not just on risks) and seek insights from how CLM systems are being used to enhance contract visibility, collaboration, and control.
Value Realization: Contracts hold the promise of delivering value over time. However, value realization isn't automatic; it requires active monitoring and management. Businesses often seek insights into how effectively contracts are delivering on their intended value propositions. To that end, in-life contract management involves tracking key performance indicators (KPIs) related to contract performance, ensuring that the expected benefits are being realized, and identifying areas for improvement.
Advanced analytics tools can extract valuable insights from contract data, enabling stakeholders to make faster and smarter decisions. Data analytics can reveal patterns in contract performance, identify areas of potential risk and highlight opportunities for revenue growth. Businesses are interested in how data analytics can be employed to derive actionable insights from contract information, and the practice of in-life contract management can support that objective.
Margin Improvement and revenue generation: Improving margins is a perpetual goal for businesses. In-life contract management contributes to margin improvement by identifying opportunities for cost optimization, renegotiation, and efficiency gains. Stakeholders want to know how well contracts are being leveraged to drive cost savings without compromising quality or client satisfaction. This may involve renegotiating terms with suppliers, optimizing resource allocation, and streamlining processes outlined in the contracts.
Contracts can be powerful tools for revenue generation beyond the initial transaction. Businesses are keen to understand how contracts are being utilized to upsell, cross-sell and uncover new revenue streams. In-life contract management involves proactive identification of these opportunities, aligning them with customer needs and tailoring offerings to maximize revenue potential.
Workplace Efficiency and the technology revolution: AI and automation are not new in contract management. One only has to look at the manufacturing and software engineering industries for evidence – they have been using technology to support delivery for years. But legal thought leaders have recently become especially vocal on this subject.
The complexity and scale of modern business contracts necessitate the use of advanced technology solutions. Businesses are interested in how technology is being harnessed to streamline in-life contract management processes. Natural Language Processing (understanding), Large Language models (summarization and generation) and Generative AI (creation of new works) underpinned by Algorithms and Machine learning have the potential to transform the way we manage contracts and provide legal services.
Advanced analytics tools can extract valuable insights from contract data, enabling business stakeholders to make informed decisions. Data analytics can reveal patterns in contract performance, identify areas of potential risk, and highlight opportunities for revenue growth. How data analytics are being employed to derive actionable insights from contract information is real and available today. But this data is just a stream of consciousness or language without insights. AI and machine learning technologies have the potential to revolutionize in-life contract management. These technologies could automate routine tasks, predict contract performance based on historical data and even recommend optimal negotiation strategies.
All of this requires the practice of in-life contract management to make sense of the data to propose actions to allow the business to take quantum decisions.
The future of in-life contract management involves working in harmony with technology, enabling contract optimization that (at all times) protects the organization’s interests, reduces risk and enhances profitability.
I asked a well-known Large Language model to write my conclusion. It said,
“In-life contract management stands as a critical pillar of modern business strategy. Business stakeholders are deeply invested in understanding how contracts are being managed after the ink has dried, with a keen focus on protection, profitability, and revenue generation.
By addressing concerns related to compliance, risk management, value realization, margin improvement, and revenue generation, organizations can demonstrate their commitment to optimizing contract performance and fostering enduring success in an increasingly competitive marketplace. Leveraging technology, such as contract lifecycle management systems, data analytics, and artificial intelligence, further empowers organizations to navigate the complexities of in-life contract management with agility and precision.”
A pretty good but bland summary. It captures the requirement to live and breathe in-life contract management – albeit without much enthusiasm. This highlights the importance of a collaborative relationship between humans and tech to achieve the full potential of in-life contract management.
Once you know your contract portfolio well enough to reduce day-to-day operational residual risk and improve the financial position of the business, the opportunities are endless, as today truly is an exciting time to be in In-Life Contract Management.
