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An easy start for information governance: legal agreements and contracts management

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8 reasons why your organization should have implemented an automated and standardized solution yesterday!

• Contract management enables you to run an efficient and productive organization. Legal agreements impact all aspects of an organization: employees, suppliers, resellers, customers, intercompany relations (often with many complex fiscal consequences), and shareholders, to name just a few. These agreements protect us and provide us with special conditions, licenses, service level agreements, limits to our liability and other rights. Running an efficient and productive organization starts with managing this legally vital information.

• You can no longer manage all of this information manually. Typically, a Global 2000 has more than 250,000 active contracts at any time. Smaller organizations with around 100 employees  have several thousand agreements in place. It is almost impossible to manually manage all of this information and its subsequent liabilities, obligations and rights. Especially because multiple departments and stakeholders are often involved.

• You need standards and central quality control. When all agreements and contracts are managed and processed according to one standard and into one central repository, it is far easier to control quality upon  input/intake, assign standard meta information, and categorize and manage the lifecycle of the agreements. These are difficult tasks in a decentralized process.

• It ensures you never miss a deadline. Have you ever missed a deadline? Somewhere along the line, I am sure we lost money because we missed our window to cancel a maintenance contract for a product we no longer used, or we forgot about an employee agreement that automatically renewed into a long-term assignment. Maybe we even forgot to notify a reseller of new pricing in time. This list can go on and on. There’s simply no excuse for forgetting a legal deadline that results in damages, lost opportunities, tax claims or other additional unwanted liabilities.

• It keeps you from  leaving money on the table. Agreements that unintentionally expire or automatically renew usually lead to higher cost or lost revenue. Manage your contracts properly and you can not only save money but also make some!
 
• It helps your financial auditors. Every organization has regular internal and external audits. Auditors not only check terms and conditions but also check issues such as (i) tax impact of transactions, (ii) revenue recognition or (ii) total value of outstanding guarantees and warranties. By using standard meta information, a central repository and advanced full-text search, you will make life (and this efficiency and cost) for external auditors so much easier.  Also, by explicitly mapping out all this information, you have better insight into the often complex fiscal, legal and financial consequences of transactions.
 
• You achieve real-time up-to-date due diligence. Have you ever experienced the process of due diligence? If you did you will remember! Nothing is more painful than having to collect, inventory, categorize and disclose (hundreds) of thousands agreements under the pressure of a due diligence deadline. You want to be prepared and nothing is easier than to centrally manage your legal agreements properly. You will end up with a real-time and up-to-date repository that can be used in any due diligence process immediately without additional stress, risk of errors, or huge outstanding liabilities as a result of incomplete data rooms or “skeleton” agreements that pop up later!
 
• Automating and standardizing the process pays for itself faster than you think. I have seen implementations that paid for themselves within just a few months. A great example of such an implementation can be found here: http://www.zylab.com/default.aspx?Doc=cs%2fCS106+-+Akzo+Nobel+Contract+Management.pdf.

So, don’t wait too long if you do not already have a system to manage your contracts and legal agreements. The benefits are clear and there are little implementation risks. Straight forward systems can be obtained from various vendors as off-the-shelf solutions. More complex (S-Ox) compliant solutions that include full records management capabilities and that can handle complex retention and disposition schedules are available from a few specialized vendors. I am sure that there is a solution for your organization that is within reach!

This post and comment(s) reflect the personal perspectives of community members, and not necessarily those of their employers or of AIIM International