Contract visibility is essential for mitigating risks in our agreements. Without visibility from the start of the contracting process, we have no way of knowing for sure that we are optimizing our customer agreements and enforcing our supply agreements -- no matter what is happening in the broader business environment.
Contract visibility is essential for mitigating risks in our agreements. Without visibility from the start of the contracting process, we have no way of knowing for sure that we are optimizing our customer agreements and enforcing our supply agreements -- no matter what is happening in the broader business environment.
Within that environment -- today's market -- customers face many challenges, from the unknown impacts of the 2024 US presidential election to global inflationary risks and beyond. Contract Lifecycle Management (CLM) and end-to-end integration with business management systems can help identify, mitigate, and take action on risks such as:
- New administration, new agency rules and regulations: CLM helps you repaper for compliance.
- Inflation and other market pressures: CLM helps you identify money left on the table.
- Potential recession on the way: CLM helps you find cost savings.
This article responds to these complex challenges by exploring key questions people ask about technology’s impact on contract management. The text also addresses uncertainty, fueled by politics.
Organizations are facing mounting external uncertainty in the market —perhaps none more significant than the unknown impacts of the 2024 US presidential election to global inflation. These can stress any company’s contractual relationships with customers and suppliers. A sound CLM system can help mitigate potential risks and impacts.
Some of these uncertainties and disruptions are as follows. Did you know that contract visibility could help prevent or provide visibility into all of them?
- Increased uncertainty in trade policies and tariffs causes businesses to delay capital investments and stock up on inventory today for fear of increased cost and availability.
- Onshoring productions to diversify supply chains outside of China prolongs a trend that started under the prior Trump administration and will likely continue.
- Possible increases in energy costs due to deregulation and Generative Artificial Intelligence (GenAI) requires significant power resources. From automotive companies to technology companies, all seek additional sources of electricity and try to meet the environmental and fossil fuel reduction requirements.
- A backward step on climate policy that had been pushing the energy market toward electric vehicles back to oil and gas creates a bullwhip effect on the supply chain. Market demand isn’t what the electric vehicle (EV) companies anticipated. As examples, many manufacturers cut back or significantly changed their EV market forecast. Many car shoppers are not buying EVs yet. Whether or not this is due to the high sticker price, or the new range anxiety, or the fear of battery degradation and potential fires – no one knows for sure, but such events are happening.
- Stubborn inflation could keep interest rates higher for longer than expected, increasing fiscal and financial risks around the world. We know already that services inflation rose higher than expected last quarter.
- Increased tariffs will hurt living standards, and impact inflation by increasing the cost of imported goods.
Always be able to easily access your contracts and respond at a moment’s notice.
Organizations need to understand the obligations within their contracts so that they can prepare for risks -- possible impacts or the ability (or inability) to respond in accordance with the terms of the agreement. You might want to begin by asking questions like these two:
- Does your contract allow for inflationary price adjustments?
- Does your contract allow for procurement from many sources to create competition and alleviate geopolitical risks?
Doing this may require a manual search of your agreements if you don’t have a CLM solution that brings all your contracts into a central location and identifies all clauses mentioning Artificial Intelligence (AI). Even more powerful is a CLM solution that flows contractual obligations to your purchasing systems. This helps automate and mitigate your risks so action can be taken on time.
Another strategy is using a CLM to understand where your contractual partners do business. For example, how do you know what product is being procured from a country like China?
For many organizations, a manual search is essential when leadership asks about contracts they may need to immediately respond to or take action against. With a CLM, the procurement or supply chain team can accurately, quickly, and easily provide the location of the party they are contracting. This timely action allows teams to respond quickly with contractual action and mitigation.
A CLM solution can help businesses identify their rights with both customers and suppliers. The risk of inflation, geopolitical impacts, and deregulation impact both the buy and sell side of contracting. That’s why you need to ensure your business tracks obligations and acts and mitigates risks before they become issues.
The right CLM solution can help with existing contracts as well as new, executed contracts ensuring that data is connected between your prime and sub-tier supplier agreements.
With proper contract visibility, we can understand and mitigate risks in our contracts to assure ourselves that we are optimizing our customer agreements and enforcing our supply agreements -- no matter what is happening in the broader business environment.
ABOUT THE AUTHOR
As an agile executive with decades of experience in international Aerospace and Defense companies Kim Miller has an established track record of transforming organizations, processes and systems to deliver savings. She is a highly adaptive leader of both tactical and strategic initiatives with the proven ability to establish proactive practices to identify and mitigate risk.
ABOUT ICERTIS
Icertis stands at the forefront of revolutionizing contract lifecycle management, empowering enterprises worldwide to optimize their contractual processes. With a cutting-edge platform harnessing the prowess of AI-enabled Contract Intelligence, Icertis redefines how organizations manage, analyze, and derive insights from their contracts—ensuring compliance, mitigating risks, and unlocking new avenues for growth and efficiency.
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