5 Critical Questions Financial Service Organizations Must Ask About Their Contracts

October 31, 2022

Today’s banking and financial services companies compete in a marketplace defined by disruption.

New technology, economic uncertainty, market volatility, evolving regulations, and high expectations from customers are increasing competitive and compliance pressures that banks and financial services companies must manage.

The good news is that companies already possess a powerful tool to help them weather such uncertainty—their contracts. 

Today, financial contract management software that can read contracts, structure their data, and connect that data across the enterprise are changing how banks look at their contracts—not as cumbersome documents to be managed but strategic advantage to be leveraged.

Structured and connected contract data enables banks and financial services to create more value from their contracts, automate contract processes, and gain unprecedented insights powered by the unique business information found only in contracts. Ultimately, banks can ensure that the intent of every business relationship and transaction is correctly memorialized in the contract, and fully realized in practice.

This goes beyond contract management and into what we call contract intelligence. Contract intelligence is a differentiating technology for banking and financial services institutions that enable them to increase revenue, reduce costs, improve compliance and eliminate risk.

Yet with all the other digital transformation pressures at hand, it can be difficult for companies to take the first step toward contract intelligence. Here are five questions you and your team should ask to begin to understand where you stand in terms of maximizing the value of your contracts—and where you can go.

  1. Are your contracts, and contract data, centralized in the enterprise?

Is there a single system of record and source of truth for all contractual commitments in your organization—be it with suppliers, customers, partners, etc.? The knee-jerk reaction is often, “Of course not. Our sourcing teams and customer teams have their own systems.” This is a status quo that deserves serious scrutiny. After all,

Most organizations have a single source of truth for all customer data (CRM) and employee data (HRM). Why are contracts not governed by the rules that these and other relationships operate by?

  1. Do stakeholders have visibility into the contract process?

 As retail banks know, digital transformation has changed expectations around visibility: customers want to be able to log into their accounts anywhere, at any time, and know they are up to date. Do your internal stakeholders have the same expectations about contract visibility? Do they know what’s been executed? What’s tied up in reviews? What obligations exist? What’s about to expire or renew?

  1. Are obligations being met? Is revenue being protected?

Every contract, every clause, has a purpose—and intended impact on the business. Often those clauses are painstakingly negotiated over. But what tools does your business have today to ensure that intent is being realized in practice? Are contracts actively consulted by front-line business users, or only referred to if something goes wrong? World Commerce & Contracting estimates that 9.2% of a contract’s value goes unrealized due to unfulfilled obligations. How confident is your organization that it’s above average?

  1. Can you manage risk across agreements?

Taken in the aggregate, a company’s contract portfolio can provide a detailed view into the risk landscape it is operating in. For example, banking and financial services companies are required to monitor third-party vendors to ensure they don’t pose a risk to operations.

Contracts are the single source of truth for who these institutions are doing business with. Yet without visibility across all their agreements, contract risk management can be difficult—or impossible.

  1. Are your contracts compliant with regulations?

Banking and finance regulations are in a constant state of evolution and keeping contract language—in both new and active contracts—up to date with those regulations can be impossible if not centrally managed. When thinking about contract compliance, how confident are you that every contract going out complies with recent regulatory changes and can be discovered quickly if an audit request is made by the regulators?

Conclusion

After the last several years, it should be clear that digital systems are critical to responding to today's challenges. Nowhere is this truer than with contracts.

With contracts governing every dollar in and out of a business, investing in  contract intelligence as part of digital transformation is a critical step in preparing your organization for whatever comes next. Contract intelligence can help you build economic resilience for uncertain times by ensuring the intent of every contract is fully realized.

Now is the time for businesses to ask themselves how sound their fundamentals are—and nothing is more fundamental than contracts. By employing contract intelligence now, your business can better weather the storm and come out the other side of today's economic turmoil stronger than ever.

To learn more, access our complimentary eBook:

Contract Intelligence for Banking and Financial Services.