4 contract management best practices to unlock … · 4 contract management best practices to...
TRANSCRIPT
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GET SPEED AND CONTROL THROUGHOUT YOUR CONTRACT LIFECYCLE
4 CONTRACT MANAGEMENT BEST PRACTICES TO UNLOCK VALUE
Webinar: 29th January, Tuesday
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In his role as CEO of IACCM, Tim works with leading corporations,
public and academic bodies, supporting executive awareness and
understanding of the role that procurement, contracting and
relationship management increasingly play in 21st century business
performance and public policy.
Prior to IACCM, Tim's business career included executive roles at
IBM and a period on the Chairman's staff, leading studies on the
impacts of globalization and the reengineering of IBM's global
contracting processes. His earlier career involved the banking,
automotive and aerospace industries, initially in Corporate Finance
and later in commercial and business development. He led
negotiations up to $1.5 billion in value and his work has taken him to
over 40 countries.
Tim CumminsSenior Director, IACCM
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Mr. Raguette is very passionate about the application of
innovative technologies to solve real-world business
problems with a strong emphasis on enterprise
solutions.
Arthur has more than two decades of experience in
working in Information Governance domains across
industries. Arthur’s prior technology passions included
high-performance B2B middleware, SaaS deployed
master data governance platforms and hybridized SaaS
applications for HR, and Employee domains.
Arthur RaguetteExecutive Vice President, Ultria
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AGENDA
1. Cultivate a contract repository
About Ultria
The need for best practices in Contract Management
4 best practices to unlock value
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
Summary and Q&A
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About UltriaUltria develops and licenses Ultria CLM -Contract Lifecycle Management for enterprise legal departments.
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Proven CLM Software
Ultria’s scalable, SaaS-delivered CLM software leverages Artificial Intelligence and Machine Learning to deliver unrivaled ease of access and ease of adoption in today’s complex business landscapes.
Ultria’s CLM technology has been deployed at 100’s of large enterprises.
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AGENDA
1. Cultivate a contract repository
About Ultria
The need for best practices in Contract Management
4 best practices to unlock value
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
Summary and Q&A
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GET SPEED AND CONTROL THROUGHOUT YOUR CONTRACT LIFECYCLE
The Need for Best Practices in Contract Management
Companies in utilities, aerospace, defence, and
food manufacturing can have
around 90% or more of their annual revenues represented
in contracts.(Source : McKinsey)
Organizations lose 9.2% of revenue every year due to
poor contract management practices.
(Source : IACCM)
Global businesses lose $153 billion per year as missed savings due to ineffective contract management .
(Source: Aberdeen group)
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GET SPEED AND CONTROL THROUGHOUT YOUR CONTRACT LIFECYCLE
AGENDA
1. Cultivate a contract repository
About Ultria
The Need for Best Practices in Contract Management
4 Best Practices to Unlock Value
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
Summary and Q&A
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GET SPEED AND CONTROL THROUGHOUT YOUR CONTRACT LIFECYCLE
1. Cultivate a contract repository
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
4 Best Practices to Unlock Value
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GET SPEED AND CONTROL THROUGHOUT YOUR CONTRACT LIFECYCLE
AGENDA
1. Cultivate a contract repository
About Ultria
The need for best practices in Contract Management
4 best practices to unlock value
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
Summary and Q&A
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12 – 15%DIDYOUKNOW?
of an organization’s contracts
are lost or unaccounted for
(Source: Aberdeen Group)
62%of the surveyed companies deal with
more than 100 contracts a month
(Source: Ultria CLM Survey 2019)
26%deal with more than 500 contracts
a month
(Source: Ultria CLM Survey 2019)
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1. Shared drive
2. Document management system
3. Contract repository solution
POLLQUESTION#1
Where do you store the majority of your contracts?
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Findings from Ultria 2018 Year End CLM Survey
64%of the respondents of our survey said their
organizations have moved to a contract
repository solution, yet ‘Searching existing
contracts’ is the most prevalent of all big pain
areas across the contract lifecycle challenges.
This contradiction indicates that majority of the organizations may
be using earlier generation tools such as Document
Management Systems rather than true contract repositories. As
is often the case with document management systems, they lack
intelligent search options and personalized dashboards for real-
time visibility across the contract database.
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1. No centralized storage for all contracts
2. Not easy to search contracts
3. Security threat due to dispersed storage of contracts
in folders, PDFs and file cabinets
4. Risk of misplacing contracts
5. Poor visibility into contracts
Pitfalls of not having a contract repository
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Advanced Contract Repositories Document Management Systems
Multi-parameter search and tracking optionse.g. Free-text searches, meta-data searches etc.
Personalized dashboards for real-time view
Pre-configured alerts and reminders
Contracts can be edited and approved in the repository software itself
Basic keyword search options e.g. File name searches
No personalized dashboard for real-time view
No facility to configure alerts and reminders
Contracts are shared over email for reviews and approvals
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• Find any contract any time
• Save time otherwise wasted in comparing contracts from multiple locations
• Have actionable data - such as contract value, due dates etc. – at your finger tips
Benefits of cultivating a contract repository
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AGENDA
1. Cultivate a contract repository
About Ultria
The need for best practices in Contract Management
4 best practices to unlock value
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
Summary and Q&A
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DIDYOUKNOW?
60%of contracts get automatically
renewed due to buyer oversight. (Source : Forbes)
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Consider the case of a toy maker who has to recall more than 18 million SKUs due to the use of a harmful metal in the paint, which is against the state law.
Although its legal team is well aware of the regulatory policy, the same gets missed - while drafting the contract with the paint supplier - because of absence of procedural checkpoints. Moreover, there is no clause about indemnification of the toy maker in such a scenario.
Eventually, the toy maker, faces multiple lawsuits, a fall in its stock prices and a huge blow to its brand image due to the breach of compliance - clearly, a nightmare which every legal operations and contract management function would want to avoid. .
Example : A case of reputational loss
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1. Inconsistency in contract language among different
contracts of the same category
2. Duplication of effort by multiple stakeholders for the
same contract
3. Omissions of important clauses and obligations
4. Absence of audit-ready versions of the contract
5. Missed compliance checks
6. Missed approval steps for high value, critical contracts
Pitfalls of not having standardized contract processes
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1. Contract templates and clauses
2. Scenario-based approval workflows
3. Audit-ready versions and compliance documents
POLLQUESTION#2
Which of the below do you have the greatest difficulty in standardizing?
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Capturestakeholders’
business requirements.
Ex. A contract template handy for every scenario, easy to find by business
users.
1 2 3 4 5
Introduce a vetting mechanism for third
party templates.
Ex. AI-based contract parsing and clause level comparison.
Identify As-Is process and define a To-Be
process.
Ex. Contracts to go for approvals to the specific stakeholder
depending on contract values,
contract types etc.
Be audit ready.
Ex. All contract versions during
authoring stage are easy to find and view at any point of time.
Build a culture compliance
accountability.
Ex. Assign stakeholders to
measurable compliance metrics.
How to Standardized Contract Processes: Identify As-Is Process and Define To-Be Process
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1. Increased immunity to business risks
2. Protection against regulatory audits
3. Increased adoption and adherence by internal stakeholders
Benefits of standardized contract processes
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AGENDA
1. Cultivate a contract repository
About Ultria
The need for best practices in Contract Management
4 Best practices to unlock value
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
Summary and Q&A
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DIDYOUKNOW? 75%
Percentage of compliant contracts is the metric most voted as “Very Important”, 2X compared to Contract Authoring Cycle Time. (Source: Ultria CLM Survey 2019)
Yetof contracts lack KPIs and TCO reporting (Source: McKinsey )
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Consider the case of a social media platform which exposes its user data to its various partners. Although it has all the necessary fair use, and privacy clauses in its contract, let’s say, one of the partners violates these clauses and sells the user data to a political consulting firm.
Due to the absence of a mechanism for tracking the contractual obligations, this gets overlooked, only to surface 5 years later as a scandal which costs the social media platform not only trust of its users, but also $150B of market value in just 90 minutes.
This huge loss points out that it’s not enough to draft and sign strong contracts; companies must have a robust way to track contract obligations, monitor compliance and take immediate action to remedy breaches if any.
Ex. 3: A case of violation of contract terms
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1. Projects exceeded timelines initially contracted
2. Substandard product/service implementation
3. Penalties due to neglected obligations
POLLQUESTION#3
Which of the following problems has your organization most-often faced?
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measurement
Every contract has KPIs
associated with it
1 2 3 4 5
Every project stakeholder is aware of the KPIs for their
contracts
Characteristics of Effective Contract Performance Measurement
6
All contractual timelines are
translated into milestones
Stakeholders are alerted about
the milestones well in advance
Everybody can see how their contracts are performing at
any point of time
Remedial actions are initiated to
bring underperforming contracts up to
speed
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• Improved customer service
• Increased revenue/business value due to fuller contract utilization
• Savings by way of leveraging volume discounts, penalty avoidance etc.
• Increased accountability of project stakeholders, internal as well as external
Benefits of measuring contract performance
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GET SPEED AND CONTROL THROUGHOUT YOUR CONTRACT LIFECYCLE
AGENDA
1. Cultivate a contract repository
About Ultria
The need for best practices in Contract Management
4 Best practices to unlock value
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
Summary and Q&A
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DIDYOUKNOW?
Business spend on an individual, standard, low-risk
procurement contract has increased by 38% in the last 6
years and is estimated to be at $6,900 on an average.(Source : IACCM)
12%of total annual costs are committed to contract management and administrative tasks (Source: PwC)
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1. Departmental budgets are difficult to justify and report on
2. Absence of team accountability and efficiency
3. Complacency and old ways of doing things tend to stall progress
4. There is no way to know where the saving potential LIES
Pitfalls of not tracking costs of contract management
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1. Average administrative cost per contract across its lifecycle
2. Average administrative cost per contract from initiation to sign-off
3. Average administrative cost by contract type (e.g. sales, employment, procurement etc.)
POLLQUESTION#4 Which of the below would you most like
to track when it comes to cost of CLM?
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Characteristics of Effective Mechanism to Track Cost of CLM
There are TATs associated with
contract review and authoring stages.
1 2 3 4
The contract management
professionals are proportionately
assigned supervision of the contract
database.
There are yearly targets to reducing
losses and penalties incurred due to poor
contract management.
Overall, the contract
management team is ROI
driven.
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Benefits of tracking costs of contract management
• Ability to estimate departmental budgets
• Ability to plan resource allocation, new hires, replacements
• Data at hand to create a case for operational revamps, process upgrades
• Visibility into leakages and loopholes
Benefits of tracking costs of contract management
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GET SPEED AND CONTROL THROUGHOUT YOUR CONTRACT LIFECYCLE
AGENDA
1. Cultivate a contract repository
About Ultria
The need for best practices in Contract Management
4 Best practices to unlock value
2. Standardize contract processes
3. Measure contract performance
4. Track cost of contract management
Summary and Q&A
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• Contract management needs to be managed well because of the high volume of revenue committed therein
• The 4 best practices for managing compliance are:
• Cultivate a contract repository
• Standardize contract processes
• Measure contract performance
• Track cost of contract management
Summary & Q/A
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Covers insights on:
• Contract management profile / maturity level
• Contract authoring challenges
• Contract lifecycle challenges
• Contract management metrics
• Role of contract management function
• Use of AI in contract management
Ultria CLM Survey Report 2019
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AIPowered
Contract LifecycleManagement
Ultria Product Overview
Ultria CLM has been designed
to give you speed and control
throughout your contract lifecycle:
• Request
• Draft
• Internal Review
• External Negotiation
• Sign-off
• Compliance
• Renewal
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Why AI-driven Ultria CLM?
Ease of Access Central Control Powerful
CollaborativeEase of Use Connected