Contract management is a very time-consuming part of the many activities corporate legal departments are responsible for. One challenging aspect of this task is contract negotiation. In-house counsel must make sure that this phase is handled quickly while ensuring all legal requirements are met. Checking details, adding clauses, editing paragraphs are all part of the negotiation process that can lead to delays, lack of clarity and risk of non-conformity.
Legal departments must address these challenges. The solution: workflows and automation. Does your legal team have the tools to leverage them?
In this article we’ll have a look at the main challenges contract negotiation presents and discuss concrete use cases of workflows and automations that help address these issues.
Challenges legal teams face during contract negotiation
Contracts define relations with partners and clients and are essential to business success. They must be perfectly negotiated to offer a maximum of opportunities while minimizing risk and ensuring compliance and data security. Timeliness and accuracy are required at all times to reduce potential risks to a minimum.
Risk management challenges
Each contract is a growth opportunity, but it also introduces risk on several levels.
- Legal risks
Contract terms must be perfectly clear to avoid legal action linked to contract breaches. Legal risks can be due to different issues, such as improper or unused confidentiality disclosures, missing contract obligations or missed deadlines.
- Compliance risks
In times of ever-evolving regulation, the risk of non-compliance with certain legislations is increasingly important. As laws change, your contract negotiation needs to adapt and include them. This means more versions and the need for strict version control to be sure to collaborate on the most recent ones and keep control of the evolution.
- Security risks
During contract negotiation, the security of the sensitive information your documents contain is at stake. Negotiation implies collaboration and communication on documents and data on different channels which increases the risk of security breaches, over-exposition and can impact data integrity.
- Financial risks
Your contracts almost always include financial terms. Risk on this level can be due to non-payment, contract termination or missed termination or renewal dates.
- Brand risks
Contract negotiation can even have a negative impact on brand reputation and your organization’s public and customer opinion if legal, compliance or financial risks occur.
Mitigating contract-related risks is important for the organization as a whole. This can be achieved by an efficient contract negotiation process
Efficiency and workload challenges
Contract management is a big part of legal departments’ work. It’s also very time-consuming, especially in big, multinational corporations working in several languages and under different legislative frameworks. Another challenge legal teams face is the increasing volume of contracts and related data, with resources growing at a much lesser pace.
Speed and accuracy are key to successful contract management and negotiation. Timely contract approval speeds up decision making and strategic action, accuracy helps mitigate contract risks as listed above.
In short: legal departments need faster yet secure and effective contract reviewing and validation processes. Let’s have a look at use cases where workflows help maximize contract management efficiency while minimizing related risks and challenges
Use cases for CLM workflows and automation
Pre-negotiation
Workflows can be leveraged ahead of the negotiation phase of the contract und help as early as during the contract setup. Use them to create templates, integrate information and data from previous agreements or from existing databases.
- Automatically generate the contract outline, leveraging a clause library to directly integrate all relevant clauses.
- You can set up automations to flag clause deviations and error notifications.
- Use workflows integrating your CRM tool to add contract information like company name and status, for instance.
With an intelligent CLM system you can reduce contract drafting time by 30-40%.
Deloitte
During negotiation
The negotiation process itself is the most complex part. Many stakeholders are involved, internally as well as externally, and want to make edits to the contract outline. How do you make sure changes are taken into account and that everybody has at their disposal the latest version?
Version control and collaborative contract editing can be a major challenge, but using a single platform helps you tackle this issue. Not only do you ensure that the same document is used, but you also avoid security risks and data breaches as there’s no need for e-mails or multiple communication channels.
- Define granular access and editing rights to ensure that only authorized parties can edit the contract draft.
- Set automated alerts for both internal and external stakeholders to inform on edits.
- Create automatic signature requests ahead of contract finalization.
- Keep track of different versions and log history to keep control over the entire contract negotiation and avoid misunderstandings or ambiguity.
- As per the negotiation itself, there are features that help strengthen your position, such as the automatic clause deviation percentage feature. It allows you to point out clauses which don’t comply with company standards and must be revised before finalization.
Post-negotiation
After the successful negotiation, it’s time to get your contract signed. Workflows and automation can make your work a lot easier.
- You can simplify the validation process with pre-set workflows that define whose signature is needed for a contract of a given value involving specific departments, etc.
- Set workflows to create reminders and alerts to ensure timely validation and signature.
- Create a workflow to track and update contract status in other tools such as your CRM.
- Automatically generate reports for a complete audit trail ensuring compliance.
- Easy access to contract information thanks to automatically filled-in summary sheets giving an overview of key elements.
An effiicient tool for contract negotiation
Efficient contract negotiation is essential for business success. There are numerous challenges that need to be tackled and that require tools allowing you to create effective workflows and powerful automations.
With the right CLM tool you can simplify the entire negotiation process, from better collaboration to efficient document centralization to enhanced overall efficiency.
Want to find out how the DiliTrust Contract Management module simplifies your legal department’s work? Request a free demo!
