Reducing Contract Risk Today Reduces Corporate Risk Tomorrow
Organizations increasingly work with third parties worldwide. When starting contract negotiations, a company’s legal team must understand the business use for the product or service being negotiated. Unfortunately, resource constraints can often result in a “one size fits all” approach to contracts that may or may not address the specific risks of the relationship. This document offers a new approach to contract risk management that provides a consistent, systematic method of engaging and informing the legal team of risks posed by the third party relationship.
Contract Risk Management Challenges
Typical contract risk management processes face two challenges: a lack of awareness of risk on the business side and a lack of understanding of the business process by the legal department when considering a third-party contract.
Limitations of Contract Lifecycle Management Systems
CLM systems are most often one size fits all, meaning they fail to address individual third-party risk revealed during due diligence and assessment.
Contract Risk Management Opportunities
The goal of contract risk management is to protect a company from risk by addressing all the questions that surround engaging a third party, from assuring quality to uncovering any citations for fraud.
Automating Contract Risk Management Processes
Automating many contracting processes ensures that all steps are taken to assess existing or potential risk and to protect the company.
A Systematic Approach to Ensuring Contracts Account for a Relationship’s Inherent and Residual Risks
Completing due diligence ensures that third-party risk is addressed in the contract and that all stakeholders are aware of measurement programs to monitor that risk.