Contract compliance and management have become a critical focus for executives in organizations across the business spectrum. According to the PricewaterhouseCoopers State of Compliance Study 2016, 98% of responding executives said that senior leadership is committed to compliance and ethics, and 89% said that compliance monitoring is a primary area of responsibility.
The reason for this is clear: failures in contract compliance result in legal risk and missed opportunities. For example, failure to meet contractual obligations on time can impact customer or supplier relationships and expose the company to liability for breach of contract. Non-compliance with federal, state or regional regulations often results in fines, penalties, or worse – criminal charges. The frequent culprit of a company's failure to comply with contractual commitments: a lack of visibility to obligations and entitlements enshrined in their contracts.
How Visibility Affects Contract Compliance
Contract compliance is an issue for executives across any organization. Procurement leaders want to limit or eliminate rogue spend, pre-screen suppliers, and track performance metrics and SLAs. The legal team wants to ensure that all company and partner contracts adhere to legal and regulatory requirements. Sales leaders want to be sure that their teams are using the latest, approved language in their contract and not leaving revenue on the table or exposing the company to contractual risk. To fulfill these compliance needs, they have to be able to easily identify deviations, create, assign and track obligations, and monitor legal and regulatory changes in multiple regions.
Contracts whose terms, conditions, commitments, obligations and entitlements are not readily accessible – either because they are hiding in a file drawer, or stored on a hard drive but aren't searchable – are inherently difficult to monitor. Organizations that can't access their contract details throughout the contract lifecycle cannot reliably track delivery dates, fees, payments, expiration, renewals, or other terms. Managing risk and ensuring compliance becomes much more difficult with poor contract visibility.
Increased visibility, on the other hand, improves contract compliance by:
- Enabling collaboration among all stakeholders, both inside or outside of the organization
- Improving the organization's ability to track the performance of a particular contract
- Allowing the organization to consolidate spend and drive better terms with suppliers
- Identifying and flagging deviations from negotiated terms and conditions, allowing the legal team to take preventative action to ensure that minor issues do not become major problems
- Automatically tracking and analyzing contract terms and obligations to better measure performance, create continuous process improvement and minimize risk
- Driving consistency and predictability in the contracting process
- Making audits easier with better audit trails and reporting capabilities
Icertis Enterprise-Wide Contract and Compliance Management Improves Visibility
Using a cloud-based, enterprise-wide contract management platform improves visibility, enabling contract compliance. A centralized contract repository eliminates uncertainty about which version of the contract is current, reducing inconsistencies and making audits easier. Users are able to manage obligations and commitments across business units and regions, even if they are contained in third-party paper.
The Icertis Contract Management (ICM) platform is just that. It's a system that captures commercial terms including prices, discounts, rebates, incentives, and penalties, and integrates with existing sourcing, procurement, CRM, ERP and other systems. Icertis provides a single source of truth for all enterprise contracts within a given company. Pre-defined triggers generate automated email notifications and alerts, allowing teams to track compliance, measure performance against expectations, and develop risk profiles.
Putting the Platform into Practice
ICM is easy to deploy, easy to use, and easy to adapt. It maximizes revenue, controls costs, and manages risks. With Icertis, you don't worry about having poor visibility into your contracts, transforming contracts from potential landmines into valuable corporate assets.
Consider the example of Genpact, a multinational IT services company. Genpact provides business process outsourcing (BPO) services to Fortune 500 companies. These services are governed by long-term contracts with detailed terms and requirements. In the past, Genpact used a manual process to track contract commitments and identify potential problems. Naturally, the manual process offered poor visibility into Genpact's contract compliance. The ICM cloud-based platform helped Genpact more effectively monitor and manage all service commitments and improve their contract compliance.
"Icertis helped us improve contract compliance by streamlining and automating the way we monitor and manage SLA and SOW commitments." -Sanjeev Prasad, CIO, Genpact
To learn about how an enterprise contract management system can help your business monitor contract compliance, download this whitepaper: Risk Compliance and the Bottom Line – Why Contract Management Matters.