While I have been sheltering at home in the Seattle area (where Icertis is based), I've had the opportunity to connect virtually with many of our customers as they weather this global crisis. Between virtual contract negotiations, homeschooling small children, and strategizing on which safety gear to wear to the grocery store, Icertis customers have generously shared their time and insights as they process what contracting and business will look like post-COVID-19.
It goes without saying that a "new normal" awaits us as we (slowly and responsibly) emerge from this crisis. But just what that normal looks like will vary from person to person, organization to organization. In the commercial space, every company will have to assess what's changed and what remains foundational to their business as they chart a path to rebounding and thriving in the months and years to come.
Still, generalizations can be made and themes are emerging. Based on my conversations, five distinct imperatives for attorneys and contract managers have surfaced amid the commercial turbulence; the operations professionals supporting these functions should also take notice. I call them the "The 5 ‘Ds' of Managing Contracts in a Post-COVID World":
Digitize Contract Processes
The more processes a company had digitized before some or all of their entire workforce was forced to socially distance, the better positioned they were to react to the rapidly changing circumstances. This includes those companies that had digitized their contracts and contract processes. Imagine trying to identify tens of thousands of paper agreements that might be impacted by this pandemic. In this quarantine and work-from-home world, it would be impossible to retrieve those paper contracts that were stored in filing cabinets at physical office locations. Cloud-based contract lifecycle management (CLM) enables a level of business continuity simply not possible with paper-based systems.
As the Global Head of Contract Lifecycle Risk Management at a Fortune 500 company noted to me recently: "Any organization that has gone through this and decides not to digitize is certainly missing a big learning opportunity here."
Discover Contract Data
Another major learning opportunity from COVID-19 is just how fast commercial conditions can change. With the situation evolving by the hour, legal and contract professionals have had to quickly and continuously assess how the crisis impacted their company's supplier, customer, partner and employee relationships—many or all of which are defined by contracts.
Companies that had embraced contract digitization could rapidly surface contract insights (remotely and from their homes) from a centralized pool of data, and were at a distinct advantage in crafting their strategies moving forward. Contract data can tell you with whom you're doing business and on what terms, as well as where they are located and the commercial value of the contract. Access to contracting data and insights in fluid and uncertain times is truly invaluable when a global crisis hits. For example, one company I spoke with immediately surfaced what its contracts said about delivering services remotely, so they could confidently continue working with clients despite the travel restrictions and shelter-in-place orders.
Deliver on Commitments
Whether in crisis or in steady times, one foundational truth that will remain is the importance of trust and delivering on contractual commitments.
While attention can be diverted during a crisis to a handful of contracts that are disproportionately impacted, legal and contracting teams must be confident that the ongoing business of less-impacted agreements moves forward. Following execution, managing these ongoing obligations can be done manually and docketed in calendars. However, many companies that have embraced CLM have utilized technology to undertake this work.
Some companies have optimized their obligations management process by utilizing AI/machine-learning models trained on terabytes of contract data that can help discover obligations and their relationships and manage them to fulfillment, ensuring that transactions off the contracts adhere to these obligations. This is an example of how technology can free up human capital to address those contractual relationships that take priority while contract managers remain confident that other commitments and obligations continue to be delivered.
Defend Against Risk
For our colleagues in the CFO office, the pandemic provided a crash course in enterprise risk management. As the outbreak disrupted markets, CFOs were in the hot seat to create plans that increased revenue, reduced cost, accelerated cash flow and ensured compliance.
The mandate to mitigate risk is reflected in contracts and contracting processes. Getting a vital contract under signature could mean generating the cash flow necessary to maintain operations; ensuring a contract is compliant with local regulations could save a company from crippling fines; preventing maverick contracts most certainly means no contracts go out on outdated templates that don't reflect new business conditions and terms; visibility into all contracts across the organization means negotiations can be quickly pivoted to head off emerging threats.
That onus will never go away: COVID-19 proved that companies put risk management on the back burner at their own peril, and seamless contract management is a central component to both identifying and mitigating current risks and preventing future risks.
The companies in the best position to maintain business continuity when COVID hit were those that had already digitized core processes and developed the habits, skill sets and relationships necessary to get the most out of them. As one customer shared, "The great habits we developed with Icertis pre-COVID are now coming into play, to our benefit." We don't know when the next crisis will hit. But we do know that the longer you delay, the less time you'll have to prepare.
Despite the current challenges posed by this pandemic, there will be a time when legal and contracting teams will return to some semblance of "normal" (and thankfully, educating will be removed from legions of parents-turned-homeschool teachers and back in the hands of educational professionals). These contracting and legal teams, with the help of their legal department operations partners, will be well-served to document the pain points presented in this current crisis and consider the Contracting 5 Ds before the next storm.