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Blog » Make 2024 the Year of Contract Lifecycle Management Adoption

Make 2024 the Year of Contract Lifecycle Management Adoption

Last updated: 04 Jul, 2024 By | 6 Minutes Read

contract lifecycle management

Businesses of all sizes, across industry sectors, require their legal teams to have standard policies and protocols for effective contract lifecycle management.

Legal and compliance departments need standard protocols to create contract templates for their procurement and supply chain management. These templates help to manage supplier contracts effectively, negotiate favorable terms, and ensure that vendors perform as expected.

Similarly, Human Resource functions need laid down protocols to ensure effective management of employee contracts and compliance.

What is Contract Lifecycle Management (CLM)?

CLM is the process of managing the entire contract lifecycle. From contract creation, term negotiation, and signing contracts to monitoring and enforcing the terms comes under CLM.

From identifying the need for a contract, to drafting, reviewing, and negotiating contract terms, execution of the contract upon receipt of approvals from necessary authorities to its proper organization, storage, and administration, ensuring its compliance vis-à-vis the terms laid down, renewal evaluation extending or modifying the contract as needed to its termination involving proper closure, settlement, and transitioning to new arrangements if necessary, businesses can significantly enhance their operational efficiency, minimize risks, and optimize contract performance through the adoption of effective CLM practices.

Contract Lifecycle Management is not complex!

Implementing CLM practices does require the initial effort and investment. However, with proper planning, and the adoption of CLM best practices, organizations can easily have a streamlined contract management protocol.

The key is establishing clear roles, defining standardized workflows, and leveraging technology to automate tasks, track deadlines, and improve collaboration. CLM practices can help you manage contracts more efficiently, comply with regulations, and mitigate risks. These benefits are worth the effort, even though there may be challenges along the way.

The challenges that one may encounter while implementing a standard for CLM can include one or more of these instances:

  • Inefficient workflows, lack of standardization, and reliance on paper-based or disparate systems
  • Lack of visibility and control over contracts
  • Staying abreast of compliance and regulatory updates in real-time
  • Managing diverse contract types, understanding legal jargon, and ensuring consistency and accuracy
  • Lack of contract awareness and stakeholder ownership
  • Poor communication, limited collaboration, and misalignment among stakeholders
  • Challenges in managing contract renewals, re-negotiations, and amendments
  • Synchronization between systems, tools and applications
  • Resistance to change, lack of user familiarity, and inadequate training

Remember, a good contract lifecycle management system’s benefits far outweigh its challenges. For a growing organization, it enhances its agility and efficiency by streamlining the workflows, and reducing administrative tasks associated with contract management.

Improving compliance by ensuring adherence to contractual obligations, regulatory requirements, and internal policies, a good CLM will always keep the business on its track. It goes a step ahead and mitigates risks by facilitating proactive risk identification, management, and mitigation throughout the contract lifecycle.

A robust CLM system also promotes collaboration and communication among stakeholders, improving contract negotiation and amendment processes, and supporting accurate reporting and analytics for better decision-making.

Current Trends in Contract Lifecycle Management

Like the rest of the world, Contract Lifecycle Management, too, is being taken over by advanced tech and AI. The following areas are being increasingly tech-led:

1. Signature solutions:

Several e-signature options are fast eliminating the need for manual signatures and physical document handling by facilitating secure and legally binding contract execution

2. Tasks and workflow automation:

AI is automating contract analysis, extraction of key data, and identification of risks or non-compliance, enabling faster and more accurate contract management. In addition, advanced workflow applications are introducing more robust collaboration features, thereby facilitating real-time communication and collaboration among stakeholders

3. Reporting:

Advanced CLM systems are leveraging analytics for actionable insights and predictive analytics to optimize contract performance, identify opportunities for cost savings, and make data-driven decisions

4. Security and transparency:

Blockchain integration is creating secure and tamper-proof contract records, thereby enhancing trust between parties

5. Accessibility:

Mobile applications and cloud systems are allowing stakeholders to access and manage contracts from anywhere, anytime, and on any device

6. User experience:

CLM systems prioritize user-friendly interfaces, intuitive navigation, and simplified contract authoring and review processes

Make 2023 the year of CLM adoption

Your organization must make this shift. Evaluate your existing contract management processes, identify pain points, inefficiencies, and areas for improvement, and re-draw the specific needs and requirements. Once these are listed, follow the below-mentioned steps:

  • Establish standardized processes for each stage of the contract lifecycle
  • Implement suitable CLM software or tools
  • Assign clear roles and responsibilities to individuals or teams
  • Create a centralized contract repository for easy access and control by extracting major clauses and crucial information regarding renewals, auto renewals, liability, indemnification, publicity rights and survival of certain clauses after termination.
  • Metadata labelling
  • Develop standardized contract templates and clause libraries
  • Implement mechanisms for monitoring and ensuring compliance
  • Provide training and education on CLM practices
  • Continuously evaluate and refine the CLM protocol based on feedback and lessons learned

Cogneesol can manage your Contract Lifecycle Management

At Cogneesol, we specialize in providing comprehensive contract lifecycle management services. For many clients, we handle their contract creation and review, compliance monitoring, contract repository management, contract renewal and amendment management, and the implementation of CLM software or tools. With more than fifteen years’ expertise and industry knowledge, we are best suited to partner with you to effectively manage your business’s contracts throughout their lifecycle, enabling improved efficiency, compliance, and optimized contract performance.

Our optimized processes and standardized templates resulted in streamlined workflows, enhanced access to key contract information, and the creation of a reliable contract database for many law firms and legal departments.

The impacts delivered till date have been significant. As an indication of the value we bring, here is an account of an US-based law firm that we helped – Our team cleared approximately 2000 backlog files, flagged due dates for contract renewals and important clauses related to liability through contract extraction process and metadata labelling, allowing the firm to keep a real-time check on risk factors associated with the contracts.

Furthermore, we performed specific clause extraction to enhance access to key information, terms, and provisions across all legacy contracts and agreements. Another key outcome of the engagement was the creation of a standardized library of contract terms and provisions. This library served as a ready reckoner for templates and checklists for various types of contracts, further streamlining the firm’s contract management process.

Contact us at [email protected] / +1 833 313 3143 to discuss how we can help you similarly, and streamline and manage your contract lifecycles.