The companies who already also manage their identified risks in silos, with limited capacity that will help them analyze the impact across their company and supply chain. This is why there is a requirement for a paradigm shift so that companies can start treating contracts as a store of potential risks any company could face. Management of contracts goes beyond the basic definition of “contract risk management” which is commonly used today. It is actually a platform to help companies ground their risk models in business. That platform is called Enterprise Contract Management.
The Key Difference Between Contract Management System and Enterprise Contract ManagementThe main difference between a contract management system (CMS) and an enterprise contract management platform is that CMS is a system for keeping records and transactions and an enterprise contract management system is used to put contracts in the middle of key tasks to help enterprise risk management, as well as identifying opportunities for cost optimization and revenue maximization.
The Intersection of Risk and ContractsThere are many risks that contracts face during the different stages of their life - during their creation, while financing or conducting operations, or compliance or visibility risks. To combat risk at creation, companies need to ensure the language used is approved by the legal team of the company. They need to check the viability of all clauses and the approval and signature from the appropriate people. To combat the financial risks of the contract, companies need to check the customer's financial stability and their history as well as the structure of the payment methods and gateways on both ends. For companies to be able to fight operational risks, they need to ensure they have not missed any milestones and the validity terms of the contract. One also needs to ensure the right personnel is working on the contract. To fight the risk in compliance, companies need to prove the approval process to auditors and match the financial reporting to their records. All legalities need to be in place as well.
- Enterprises need to manage their risks in their contract beyond the traditional meaning of the term
- They need to anticipate contractual risks right from the formation to the operations and compliance as well
- Enterprise contract management system simplifies the process and mitigates contractual risk