Contract Management Process – Overview, Threat and Risks
When two brands or entities want to get involved – in sales or manufacturing, they typically frame a formal agreement or contract. This is a prevalent practice in the global business scene and the brands belonging to diverse sectors adhere to this norm.
Contracts help businesses in many ways – beyond doubts. A well-crafted contract between two such entities helps them to avoid risks, minimize frictions and disputes, define individual roles and enhance performance and profits. Contract management Process, therefore, is vital for success in an organization.
What is Contract Management?
Earlier, it was the skilled employees or third party service providers or consultants who handled this. However, in the last decade, the role of software in contract management has become essential. In particular, AI technology equipped software is being used for contract management nowadays. Usage of such specific applications has shot up. The companies can evade the major risk associated with contract management courtesy such apps.
The significant risks involved in contract management
Even if your company hires a veteran and reputed consultancy firm for contract management, the scope of unintentional human errors cannot be ruled out entirely. Before proceeding to pick specialized contract management software solution, analyzing and understanding major risks associated with it is crucial.
1. Hurried analysis can be risky
Every business wants to save time- whether it is for manufacturing products or analysing a merger proposal with a company in the same sector.
On the one hand, you are saving time matters. On the other hand, hurrying to review a contract may lead to unfavourable developments. Pushing in the analysis of such contracts may lead to your company skipping some important clauses which lead to major problems and expenses later.
Similarly, the hurried analysis may make your brand overlook the benefits of tying up with a company. That is why AI equipped contract analysis software has become so popular, which does not skip anything yet saves time.
2. Unintentional errors and skipping
Humans cannot be as perfect as computers, and that holds true for those professionals who are in contract creation and analysis. So, a seasoned consultant in this sector may also skip certain clauses, unintentionally when reviewing or analyzing a contract. This can happen owing to stress or workload, or both.
One such error or skipping can prove to be too costly for an entity that is about to sign a huge business deal with a large company. Skipping any cost related issue can be detrimental for the company in the future. Again, this is where AI-powered contract analysis software can save the day!
3. Managing existing contracts can be tedious
Contract management is not only about framing new contracts and reviewing a proposal from another company, as it is. Your company also needs to store the existing contracts for comparison and reference later.
Now, in a situation when a company has dozens of existing contracts and the number keeps growing, managing this manually can be slow. Even if you keep a team dedicated to the task, the scope of error cannot erase. Unless dedicated applications are there to meet the purpose, scopes of errors remain.
4. Cost can be a major hassle
Resorting to human skill and expertise for contract management needs can be costly, and not all companies can afford that. Imagine a situation when your company needs to hire a contract management consultant several times a year for framing or reviewing various contracts. This is definitely going to be costly. Besides, the availability of such experts can be another issue. They may not always be free when your company needs their service.
5. Mistakes in interpreting clauses and legal terms
A business contract requires usage of formal language and specific legal terms and clauses as well. For companies that do not have the monetary resources to engage a skilled consultant for analysis of such contracts, there are risks of misinterpretation. Specific legal terms, clauses and their implications can confuse the teams, and the result can be detrimental for the entity eventually. By misinterpreting such clauses and terms, a firm can take wrong decisions in accepting or refusing such proposals.
6. Lack of versatility
Your business may need to frame new contracts and review contract proposals. However, not all those contracts are going to be exactly similar. You may have a team that has expertise in developing and analyzing contract for tying up with third-party vendors and companies in the same industry. However, they may not be ideal for framing a contract when your company seeks expansion of operations abroad. This is another drawback of traditional contract management.
How can the latest generation contract management software reduce such risks?
The latest AI enabled contract management applications are ideal to minimize the typical risks associated with the job.
With these applications, creating multiple types of business, and legal contracts are simplified. Even if your company has not framed a contract, the applications can be useful to ease the process. These specialized software tools have pre-built templates for creating myriads of contracts. So, the users can save time which is otherwise lost in using manual analysis method.
When your company uses a modern contract management application, the scope of error is almost nonexistent. The software does not suffer from common human flaws caused due to seasoned consultants, albeit occasionally; neither do such applications skip anything while analyzing contracts and skips any clauses, small or big.
In the manual method of contract analysis, consultants or teams need plenty of time for data sorting and pre-analysis. This makes the entire process lengthier when suitable software is in place; the pre-analysis is fast. The software sorts the necessary information, and so the analysts can get into the core task right away. They can also concentrate on complex areas.
Not everywhere you can find contract analysis experts who can deal with all types of business or legal contracts. However, when your firm invests in AI enabled contract management, or analysis app, the versatility issue is resolved.
Using the latest generation contract management applications for your venture is simple, and you do end up bleeding your wallet either. These applications are quite intuitive, and your employees will be able to use these with little guidance. Typically, the companies which develop such applications (such as Anvi legal), offer required resources for the buyers/users.
These new era contract management applications can be handy for the companies that want a comprehensive solution for framing and reviewing contracts. This software can also be useful for those consultants who deal exclusively with business contract management. By using these apps, they can save time used in gathering, comparing and analyzing huge amounts of data. Thereafter, they can focus on the aspects of contact analysis that require expert intervention.