How Technology Helps With Modern Contract Governance

Content

• What is contract governance?
• What does contract governance entail?
• Why is contract governance important?
• How technology helps to establish efficient contract governance
• Centralized repository
• Automated workflows
• Monitoring and reporting
• Obligation tracking
• Intelligent integrations
• Conclusion

Drafting competent agreements is just one part of building lasting business relationships. Beyond that, companies must be extra cautious to ensure the contract complies with industry, legal, and organizational requirements. Governance is the key to maintaining control and curbing possible issues, especially for high-value and complex contracts.

What is contract governance?

Contract governance entails overseeing and managing contractual agreements throughout their lifecycle to ensure compliance, mitigate risks, and optimize performance. It involves establishing protocols, policies, and procedures to govern how companies create, execute, monitor, and enforce contracts. 

One of the primary aspects of contract governance is establishing a framework for contract creation and approval, setting guidelines for contract terms and conditions, and implementing processes for contract review and approval. Organizations can clearly define and assign responsibilities at every stage of a contract with the help of effective contract governance. Thus, there’s less chance of obligations, deadlines, and payments slipping between the cracks. 

It also involves monitoring contract performance, tracking key performance indicators, and enforcing compliance with contract terms. Consequently, businesses can achieve their outcomes as intended without incurring unnecessary losses or risks. 

What does contract governance entail?

Contract governance is the backbone of any successful business relationship. It ensures all parties involved understand their rights, obligations, and expectations. However, governance goes beyond signing on the dotted line. It plays a crucial role in overseeing the execution, compliance, and performance of contracts throughout their lifecycle. 

• Pre-contract stage

Businesses must establish clear governance structures and processes to ensure that the contract aligns with the organization's objectives and risk appetite before the drafting process. They must define the overall contract strategy, including the desired outcomes, risk tolerance, and resource allocation for contract management.

All relevant stakeholders in the contract governance process and their expectations must drive the contractual agreement. They can conduct a thorough risk assessment to identify potential risks associated with the contract and develop mitigation strategies.

• Contract formation

Once the contract is drafted and negotiated, it's crucial to establish governance mechanisms to monitor compliance with the terms and conditions of the contract. Businesses can define a clear process for contract approval, including the roles and responsibilities of key stakeholders. They must implement systems and processes to monitor compliance with contractual obligations and performance metrics.

• Post-contract stage

During the execution stage, it is essential to monitor the performance of both parties to ensure compliance with the agreed-upon terms. They can track key performance indicators (KPIs), milestones, and deliverables. Businesses must establish clear and open communication between parties for successful contract execution. 

They can utilize regular meetings, status updates, and progress reports to address issues and prevent misunderstandings during the post-contract stage. Identifying and mitigating risks is crucial to avoid potential disruptions or disputes. Moreover, contracts may require adjustments due to changing circumstances. A robust change management process should be in place to handle modifications to the contract terms, scope, or deliverables.

Why is contract governance important?

It takes a lot of work to successfully draft, review, approve, sign, and monitor contractual agreements to get the desired outcomes. That is why businesses require a thought-out contract governance framework and procedures to protect all the involved parties. Here’s how it helps companies:

• Legal compliance

Contracts include terms and conditions that govern business relationships. It is necessary to ensure all parties fulfill their obligations outlined in the agreement. Failure to comply with these terms and conditions can lead to financial losses, damaged relationships, and even legal action. Businesses can effectively monitor obligations to ensure performance with the help of contract governance. 

Parties and contracts adhere to relevant laws and regulations throughout the contract lifecycle. Contract governance enables legal professionals to establish organizational, industrial, and legal standards. Thus, businesses can avoid costly penalties and legal disputes.

• Mitigate risks

Contractual agreements inherently involve risks, whether they be legal, reputational, or operational. Effective contract governance helps businesses identify and mitigate these risks proactively. They help to establish clear roles and responsibilities for contract management. Thus, there’s accountability and transparency in the process across the board. 

Moreover, assigning specific individuals or teams to oversee different aspects of the contract lifecycle can help streamline processes and prevent misunderstandings. Consequently, there’s no scope for companies to miss deadlines, obligations, or compliance even when their portfolios expand. They can resolve potential issues during the agreement and protect themselves from unforeseen liabilities.

• Performance monitoring

Enterprises must stay on top of the contract lifecycle to ensure performance from all the involved parties. Efficient delivery of goods, services, and payments is necessary to establish lasting vendor and customer relationships. Contract governance allows businesses to track the performance of their contracts and the parties involved.

They can set up key performance indicators (KPIs) and monitor progress to determine whether both parties adhere to their obligations, deliver on promises, and achieve desired results. It can include periodic reviews, performance reports, and obligation tracking. Thus, businesses can take corrective action before inefficiencies derail the contractual relationship. 

• Relationship management

Contracts are not just legal documents. They are also tools for managing relationships with customers, suppliers, and other stakeholders. By setting clear expectations and responsibilities from the outset, contracts help prevent misunderstandings and disputes. Contract governance helps businesses foster positive relationships by holding parties accountable for their obligations.

Ensuring that both parties fulfill their obligations through regular monitoring and review of contract performance promotes cooperation and trust. In addition, effective contract governance provides a framework for resolving conflicts and addressing issues on time, preserving the relationship, and minimizing disruptions.

How technology helps to establish efficient contract governance

Traditionally, contract governance has been a time-consuming and manual process, prone to errors and oversights. However, the advent of technology has revolutionized how organizations manage their contracts. Digital contracts and processes make it more efficient, transparent, and secure.

• Centralized repository

One of the primary benefits of technology in contract governance is the ability to store all contracts in a centralized repository. It enables easy access to all contract documents, reducing the risk of lost or misplaced contracts. Thus, legal teams won’t have to search across platforms, folders, or email chains to oversee contracts.

With a centralized repository, organizations can quickly search for specific clauses or terms, track key dates and deadlines, and ensure compliance with contractual obligations. For instance, Dock contract management software offers a centralized repository within SharePoint and Office 365 environments. They can organize, control, and track how documents move across the organization as stakeholders collaborate in the contract lifecycle.

•  Automated workflows

Another tool to ensure efficient contract governance is automating contract workflows, from creation and negotiation to approval and execution. According to pre-defined rules and routes, businesses can standardize the processes. Thus, the contract gets to the appropriate stakeholders without delay. It reduces manual errors and ensures that contracts are reviewed and approved promptly. 

Dock contract management software allows businesses to set up automated workflows for request, approval, review, and signing. They can assign tasks and due dates for each stakeholder. It streamlines the contract lifecycle and improves overall efficiency.

• Monitoring and reporting

Monitoring and ensuring compliance with contractual obligations and regulatory requirements is integral to contract governance. Contract management systems offer automated notifications for key dates, milestones, and payments. It enables organizations to manage deadlines and avoid non-compliance proactively. Thus, legal professionals can minimize legal, reputational, and operational risks by automating compliance monitoring.

Dock contract management software offers custom reports to provide insights into contract performance, risks, and opportunities. These real-time and comprehensive reports empower organizations to identify trends, monitor deadlines, and make data-driven decisions.

• Obligation tracking

Depending on traditional methods means manually going through contracts to identify and track obligations. It is time-consuming and companies may end up losing track of significant clauses. Dock allows legal teams to overcome these challenges by automating the entire process.

Our AI-enabled contract management automatically extracts clauses from contracts to create comprehensive reports. Thus, businesses can access all the relevant terms and conditions within lengthy and complex business contracts within seconds. They can also set up automated tracking to ensure all parties meet these obligations. 

• Intelligent integrations

By streamlining processes and centralizing data, business integration can significantly improve contract governance. For instance, Dock integrates with other systems such as CRM,  ERP, and electronic signature platforms. 

CMS-CRM integration can seamlessly link customer information with contract data. It ensures that contracts are aligned with customer needs and preferences, leading to better contract governance. ERP system integration allows for a holistic view of all financial transactions related to contracts.  It ensures accurate billing, revenue tracking, and financial reporting.

Conclusion

As we have covered, ongoing governance is essential to getting the most out of contracts. Maintaining the drafting, negotiating, reviewing, signing, and administration of contractual agreements can be labor-intensive and time-consuming for businesses with expanding portfolios. For this reason, most organizations look to modern technology to increase the ease and productivity of their legal work.

These days, there are many ways to simplify contract governance, such as digital repositories, automated workflows, and monitoring tools. Dock's contract management software offers all these sophisticated tools on a single platform. Additionally, it makes it easier to integrate seamlessly with CRM and ERP systems to maintain ongoing cooperation throughout the contract governance process.