The Federal Government’s COVID 19 restrictions have just been extended to the end of April. While not unexpected, even the governors of NY and NJ – the two hardest hit states had only recently indicated that NY and NJ would peak in mid-April, so even the end of the month may seem optimistic to many of us in the Northeast.
What is clear, for those that have just heard that a goal would be to limit American deaths to 100,000, is that we all know that there is a lot at stake. If 100,000 lives are considered a win, which is 3X the current global death toll, the downside is measured in the millions.
What does this mean for global, or more specifically American businesses?
Accelerate the path to the normal and build the required resiliency.
How can your contracts become an asset in this process – there are a number of ways. Let’s look at a couple of key domains – revenue resiliency, supply chain optimization, and protection of your employees in a couple of ways.
Understanding the resiliency of your revenue is key to understanding your anticipated cash flow, the impact on your cash reserves, and how best to modify your commercial offers to adapt to the changing economy that we can realistically expect to be a manic rollercoaster for the next 3 quarters.
- Which customer contracts are multi-year and locked-in?
- Which customer contracts are multi-year with optional renewals AND what is the renewal notice window?
- Which customer contracts have termination for convenience AND what is the termination notice window?
- Which customer contracts have exits or renegotiation clauses based on an index or published rate?
- Which customer contracts have force majeure clauses AND are these clauses limited to acts of nature, acts of war and acts of government or is there a provision for pandemics?
Having these answers can help you understand how sticky your revenue is. Revenue agility is a different matter.
Post Award Analytics
If you manage your contracts in post-signature, then you may already have the needed insight to understand your obligations and entitlements beyond the big picture. Having visibility into line items, which individual products or service lines have been well utilized or underutilized gives your team the needed information to adapt commercial terms and marketed offers.
Further, by looking at the pre-signature negotiation history for your most favorable contracts you may be able to see which clauses are typically negotiated and look at ways to facilitate a faster close by starting with different opening positions.
Granted, making it easier and quicker to sign or renew your agreements still requires that you your customers are willing and able to buy.
What can you do with contract terms to make a material difference? Analyze your contracts for common negotiated payment terms, look at creative way to balance your needs with your customers using signed agreements as your baseline.
Certainly, this is not an end-all, but careful analysis of your contracts can identify your at-risk revenue, and by leveraging the positive outcomes of successful contracts you can double down on those behaviors that drive sustainable revenue results.