The COVID-19 pandemic has influenced the declining revenue of many businesses. With revenue streams drying up, the manufacturing sector coming to an absolute halt and distribution vendors being unable to deliver the products on time – revenue resiliency or the ability to withstand all these challenging events, is extremely essential. Most of the businesses suffer unnecessary revenue losses due to the auto-renewal of contracts that were issued before a financially stressful event. Knowing when and where to make financial cuts, which suppliers to let go and where to renew contracts is necessary. Apart from this, keeping a track of all the contracts which comply with the changing guidelines and standards, especially during a crisis is imperative and an extremely laborious task to be executed manually.
Organizations are facing a broad range of in-house concerns across departments as well as wider third-party concerns like:
- Legal operations
- Revenue visibility
- Claims and losses
- Commercial dollar outlays via vendors, suppliers, partners, contractors, etc,
- Regulations and compliances
- The financial health of third parties
To streamline operations and dealings with various partners and vendors, businesses need an effective contract management solution that involves consolidation and regularisation of all contracts in an enterprise. For this, it is essential to have a database of all the information in every contract, which most enterprises lack. Thus, there’s no quick way to view complex agreements or see how a certain clause is expressed across different divisions. Thus, a central repository is a critical requirement in an effective contract management process, and sifting through various contracts in the repository, is a function that must be automated. Moving across the next stage in the cycle is called contract details mapping and analytics which leverages superior AI capabilities to:
- Gather insight into identifying the immediate challenges to your revenue streams, commercial outlays with third parties and assess their impact on the bottom-line.
- Perform a real-time mapping exercise and risk assessment across contracts to understand the full extent of compliance and regulatory risks to identify proactive actions that can be taken.
- Conduct scenario planning activities to understand the operational implications, both financial and operational, of various scenarios, and identify mitigation options.
Artificial Intelligence (AI) technologies ease all these complications by extracting data and clarifying the content of contracts. It decreases the risk of contract disputes and increases the number of contracts that can be negotiated and executed successfully across the departments within the organization.
Effective Tools To Manage Contracts
To ensure that your company is compliant with all the obligations and entitlements in these changing markets, a few things in place will help you go a long way. Enterprises that have automated their contract management process have been able to stay compliant and resilient by:
- Tracking and acting on explicit termination clauses with specific provisions that allow cancellation only under certain specific circumstances.
- Keeping a track of customer contracts that can be terminated for convenience and what is the termination notice window.
- Leveraging AI capabilities in a contract management platform which uses a set of contract data from the central repository to recognize patterns and extract key clauses, dates, parties, etc
- Allowing them to manage its contracts more effectively by monitoring critical risk indicators and KPIs thereby identifying opportunities to improve operations
- Using simple predictions and intelligence and data analytics for due diligence that can flag individual contracts based on specified criteria and trends
Consistency and Regularization of Contracts
Renegotiating the terms in different contracts is critical to businesses with unused features. By terminating the lesser important vendors’ contracts on the basis of the value it brings to the company, the business can be made financially resilient. A contract lifecycle management solution integrated with AI helps in maintaining consistency within clauses in different contracts. It regulates contract compliance and makes it easier to identify and extract key data points which can help enterprises to organize and execute contracts as well. It is essential to keep a track of different termination clauses and damage provisions in all contracts in enterprises with many vendors and assess the risks associated with different terms.
Handling these variations is a huge task that cannot be executed manually. In order to reduce the risk of human error, Zycus’s Merlin Explorer and Protector integrated with the Contract Lifecycle Management Software records these clauses and provisions in the company’s contracts making it easier to ensure contract compliance.
Zycus’s Merlin Explorer integrated with the Contract Lifecycle Management platform can help in identifying contract types and navigate through thousands of contracts to analyze key areas like renewals, expiries, payment terms, and critical clauses. The insights and statistics in real-time will assist the enterprise in making informed decisions on managing revenue resiliency.
Zycus’s Merlin Protector integrated with the Contract Lifecycle Management platform identifies hidden risks and opportunities in contract clauses reducing the need to sift through multiple contracts manually. Its smart analytics trigger remediation mitigates risk, suggests alternatives to potentially dangerous words/clauses, and suggests an alternate path.