The full commercial fallout from the COVID-19 outbreak likely won’t be clear for many months yet, and companies of every shape, in every industry, and from every geography are all trying to quickly come to terms with the growing uncertainty that lies ahead.
My fellow CFOs and I find ourselves playing a critical role in guiding our respective organizations through uncharted waters. Our unique role in protecting cash flow and company resources, managing business risk and communicating with our investors and stakeholders has become remarkably more challenging (and high-stakes).
In addition to taking care of ourselves, our families and our communities, we’ve got to make sure our businesses recover from this immediate impact and then thrive in whatever the post-COVID-19 world will look like. To do this, the CFO needs a clear view of the company’s commercial relationships, and contracts are key to gaining that view—governing every dollar going in and out of the organization. For this reason, COVID-19 is making enterprise contract management a must-have for CFOs.
Contractual Terms Are Key to Assessing Enterprise Risk
There is little doubt that every CFO is working overtime these days to understand all of their company’s entitlements and obligations, how COVID-19 will impact their fulfillment, and what the effects will be on bottom-line profits and cash flows.
What if a government shelter-in-place order has temporarily shuttered your warehouse or plant, and you need to understand your delivery commitments? Or, what if you are a business consultant, and travel restrictions prevent you from being onsite to finish your project? In these situations, do your contracts provide flexibility or are there potential penalties you need to be aware of?
And on the other hand, what are your suppliers’ obligations to you, and what remedies do you have if their delivery is affected by COVID-19—with material impact on your business? Today’s enterprises have complex, interconnected global supply chains: sorting out the rights and obligations across the web of relationships is challenging to say the least.
Enterprise Contract Management Software Gives CFOs the Complete Picture
Unfortunately, many CFOs and their legal partners are woefully unprepared in times of crisis and are being caught flat-footed when it comes to needing insight into their contracts. Countless CFOs have already learned, some the hard way, that they don’t have adequate visibility into their contracts. Failed audits, a missed obligation, a simple need to find a contract and being unable to do so—all of these have been dress rehearsals for the crisis now at hand. As Oracle’s former CFO, Jeff Epstein, put it: “Every chief financial officer fears that there’s something going on in the organization that they don’t know about. Rule number one is, ‘No surprises.'”
So how do you know that you have a complete picture of all of your company’s contractual rights and obligations? Even if you are lucky to have all of your contracts in one place, if you haven’t digitized them in a contract management system, you won’t have the ability to quickly access the information you need out of them—especially if you have thousands of contracts. And most of today’s modern business systems won’t help you either—your CRM, HRM, Supply Chain Management or ERP systems can’t give you any insight when it comes to contracts.
Modern enterprise contract management software is the only system of record that provides that single source of truth about your contracts and gives you the ability to analyze at scale and control the commercial terms that govern your business relationships.
CFOs whose companies have deployed an enterprise contract management system can access all their company’s contracts—even when working from home. With this access, they have the ability to extract, at scale, relevant information like contract value, geographic data and customer profiles to understand how changing conditions may have enterprise impact.
With data visualization tools now available, these analytics can be presented via intuitive maps and dashboards. And with AI and machine learning tools, users get more insight at scale and speed. As Epstein puts it, “I want to have a system to know about all the agreements my salespeople are writing, all my buyers are writing, so I can understand all the cash coming in, all the cash coming out. What obligations I have, what risks I have. The only way to do that is with a single, enterprise-wide contract management system.”
Enterprise Contract Management Is Quickly Proving Its Worth Amid the COVID-19 Crisis
Frank Marty, Global Head of Contract Lifecycle Risk Management at Cognizant, described the value his company is realizing from enterprise contract management during the present crisis this way: “Knowing that we have all our customer-facing contracts in one place and then being able to dynamically search those contracts for key words and phrases has helped us to understand the scale of the issue, make informed decisions and ultimately help us to focus our mitigation efforts much more effectively.”
So far during the COVID crisis, contract management solutions have been used to assess and mitigate the impact of supply chain disruptions, understand the impact of travel disruption in the airline and travel business, and help companies more quickly develop a roadmap for managing cash flow and risk. We’re even seeing contract management solutions play a supporting role in the acceleration of COVID treatments and vaccine development as they enable pharmaceutical companies to onboard vendors, partners and trial participants quickly and with confidence that their contracts are properly managing risk. Wherever a contract or agreement exists, a contract management system can bring insight, reduce risk and even accelerate your business. No surprises.
Today, enterprise contract management is no longer a “want to have.” It is a must-have—not only for this crisis but for all the business ahead that requires running your business with more control and no surprises.
Please take care of yourself, your family, your community and your business!