Sourcing and Procurement

Navigating compliance challenges: A guide for contract management services

Contracts are the foundation of many critical business relationships, from vendor contracts and client agreements to employee agreements and more. Effective contract management can be the cornerstone of a successful business, whereas non-compliance can set you on the path to bankruptcy. And with the rapidly evolving complex regulatory and compliance landscape, contract compliance management has become more challenging than ever before.

But what are some key challenges in contract management? And how can you navigate them?

What is contract compliance management, and why does it matter?

In simple terms, contract compliance management is the list of protocols and measures that ensure a business follows the applicable contract laws – national and international – (external standards) while adhering to the business policies and guidelines (internal standards). In short, if a contract outlines the goals a business wants to achieve within a contractual relationship, contract compliance management ensures these goals are met legally.

Contract management and compliance play a crucial role in the risk management strategy of a business as they can help protect businesses and individuals, protect the company's reputation, ensure commodity price compliance, and much more. Therefore, a well-organised contract management team is instrumental in ensuring minimal contractual risks, cost control, and avoiding unnecessary penalties while ensuring regulatory and statutory compliance.

Key challenges in contract management

You cannot underestimate the significance and role contract management plays in safeguarding your business while meeting the performance objectives you want. But today’s ever-evolving regulatory landscape, rapid technological advancements, intricate business relationships, and challenges of globalisation make contract management extremely challenging.

Here are some key challenges in contract management that modern businesses must navigate:

Inefficient contract creation

Contract creation – especially relying on manual workflows – is time-intensive. Factors like reliance on old templates, copy-pasting from previous contracts, and formatting inconsistencies can introduce delays and errors in the contract lifecycle, resulting in inefficient contract management.

Poor contract visibility

As business operations grow, you can end up with a multitude of contracts across different teams, departments, and locations. This can lead to a lack of contract visibility, potentially resulting in compliance issues, overlooked obligations, or missed renewal dates.

Risk mitigation and security concerns

In the absence of a clear contract management workflow, identifying, managing, and mitigating contract-related risks – like non-compliance, performance issues, and missed renewals – can be daunting. Additionally, safeguarding sensitive contract information – especially in the light of stringent data security and privacy regulations – is also an ever-present challenge.

Inefficient workflow and communication

Inefficient workflows – especially if you rely on manual processing – can significantly hinder contract compliance management. This contract management issue becomes even more of a hindrance when you account for teams in different locations, time zones, or international markets. Inefficiencies in workflows and communications can hinder contract version control, performance monitoring and management, compliance management, and much more. These processes can become extremely resource and time-intensive, leading to further inefficiencies, errors, and delays.

Compliance and regulatory issues

Contract management teams often struggle with ensuring every party adheres to the terms and conditions of the contract while complying with applicable contract law. The constantly evolving regulatory and compliance landscape further exasperates these challenges, especially for businesses operating in the international markets.

Overcoming contract management issues

Although the challenges may seem daunting, adopting some simple best practices and leveraging contract lifecycle management solutions can help you navigate them effectively. Even in the absence of a dedicated legal team, you can use the following tactics to overcome major contract management issues:

Creating a contract policy and workflow

Creating a robust contract policy and workflow can give your employees clear guidelines on how to effectively manage contract compliance and ensure clearly defined roles and responsibilities for every employee.

Using legally compliant templates

In the absence of a dedicated legal team, using legally compliant templates can help you avoid any mistakes, lower the chances of violations, and minimise associated risks.

Developing a dynamic repository

A dynamic repository can be the answer to poor contract visibility and improve communication by making all the information available in a single place. This way, you have full control over document versions, updates, and contract renewals.

Tracking the right metrics

Actively tracking the right metrics can help you improve contract compliance management and processes. However, defining the right metrics for your business – like turnaround time, dollar value, reading simplicity, deviations, or legal obligations – is crucial for this to work.

Conducting regular audits

Regular audits can help you see any compliance issues in your contract management lifecycle. These insights can help you not only improve contract compliance management but other operational areas as well.

Paying attention to compliance changes

With the constantly evolving regulatory landscape, optimising and improving your contract management policies is not enough. You need to keep an eye on any compliance changes – in local and international markets – to ensure a holistic approach towards ongoing contract compliance management.

How can Infosys BPM help?

Manual processing and inefficient workflows are the Achilles' heel when navigating challenges in contract management. However, contract management solutions can help you overcome the inefficiencies, delays, and bottlenecks in manual workflows and deliver value through improved contract compliance management and reduced lifecycle times. With Infosys BPM, you can leverage next-gen technology to centralise contract management, improve response rate, enhance visibility, and improve overall contract compliance management in today’s dynamic regulatory landscape.