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What the Coronavirus Outbreak Teaches Us About Supply Chain Risk and Enterprise Contract Management

By Bernadette Bulacan

As the novel coronavirus (COVID-19) continues to spread across the world, first and foremost on everyone's mind is the wellbeing of those personally affected by the outbreak. But as the disease disrupts markets and supply chains, companies must also pay close attention to how the outbreak will impact their business.

In today's information-on-demand age, one might assume that companies could simply log into a system, pull up a map of their supply chain, and see what suppliers they have in the most affected areas. The reality is often quite the opposite: for large companies with different divisions participating in multi-tier supply chains, it can be challenging or even impossible to gain a global view of their supply network no matter how many systems they log into.

The exceptions are those companies that have digitized their contracting processes and deployed an enterprise-wide contract management platform. Contracts are the single source of truth for who a company is doing business with, including who it is sourcing from and on what terms. Therefore, an enterprise contract management platform is the system to tell you, for example, how many contracts you have with suppliers in Milan, and what protections you have around disruptions related to infectious disease.

As noted elsewhere, force majeure clauses can vary from contract to contract, and depending on the specific language, these clauses may or may not apply to a virus outbreak like COVID-19. Contract lifecycle management software provides companies an essential system of record to surface these contracts and clauses so companies can respond to rapidly changing conditions like the current outbreak. And the additional power of AI trained on a robust and rich digitized data set enables a company to more quickly identify force majeure clauses, extract geographic data or identify other critical contractual data that can aid in a rapid response. AI allows this work to be done at scale across thousands of contracts in a way simply not possible via manual review.

By providing this level of visibility, enterprise contract management software not only allows companies to be reactive to changing variables; it helps companies be proactive and build more resilient, sustainable supply chains to begin with. As my colleague Vivek Bharti has pointed out, companies often set goals to source materials from a diversity of geographic locations to limit the impact of disruptions. Yet those parameters can be difficult to monitor and enforce on the ground. With enterprise contract management, rules can be built into the system so that when geographic thresholds are reached, buyers must either get special approval to execute a buying agreement or find another supplier in a different geographic location.

As the situation develops, check back here for best practices and insights on how companies can leverage contracts and contract management software to stay agile during the outbreak.

And please consider a donation to a charity helping to fight the spread of coronavirus.

Image courtesy of the CDC