You can never be completely devoid of risks in a business. But organizations can certainly adopt contract risk management methods and take proactive steps to reduce adverse effects. The best way to do that is to eliminate inefficiencies in contract management and improve the company-wide understanding of contract risks.
A Salesforce-integrated Contract Management Software offers a centralized platform and structured operation to manage risks. Its streamlined sales and contracting process better prepares organizations to protect assets and reduce losses. That is the best an organization can do while dealing with hundreds of financial and legal landmines of business contract management. This blog post discusses how Salesforce contract management helps with contractual risks.
We understand that an unchecked contract risk can mean financial and legal repercussions for an organization. And in the long run, it can adversely affect the reputation and integrity of a company. That is why companies require a proactive contract risk management strategy. They need to identify and eliminate potential pitfalls before they become an issue for the company.
All the problems in a contract lifecycle may not be predictable, but companies can set up defenses to avoid lasting losses. A company’s scale and risk appetite define its risk and management strategy. Some of the common areas of risk for typical business contract management include:
Security risks mainly deal with the confidentiality and safety of contractual agreements. For instance, unauthorized personnel or wrong parties accessing sensitive contract data. There is always the possibility of legal documents getting stolen or misplaced.
For business contracts, the key financial risks include one of the parties going bankrupt, missing key contract dates, renewing an unprofitable contract, etc. Financial risks are essentially any contractual dangers that result in monetary losses.
It is when the invested parties are not complying with the legal terms and stipulations outlined in the contractual agreement. Liability risks include contract breaches, terminations, litigations, etc. If the legal document is not up to date with recent changes or amendments, it can lead to contract risks.
Let us look at the effects of ineffective risk management now that we know of the risks associated with contract management.
Business contracts lay out the relationship between two parties. Any shortcomings in contract lifecycle management reflect adversely on an organization's day-to-day operations. Some of the direct repercussions of contractual risks are as follows:
Poor contract risk management causes businesses to lose money. They will not be able to obtain the absolute value of the contractual agreement. Also, missing significant deadlines means paying additional costs to stay on track.
And if a company fails to keep track of a contract, it might remain unaware regarding renewal and termination dates. Consequently, they end up renewing and paying for a service or product they no longer need. It is certainly a possible loss for vendor agreements, lease agreements, etc.
The legal department would always be preoccupied with dealing with the repercussions if businesses failed to address potential contractual risks promptly. Instead of handling high-value tasks, they will be busy putting out flames.
Also, unchecked regulatory risks delay the entire sales and contract management process. As a result, it will take longer for the sales team to close deals and get clients on board. These unnecessary hurdles can harm customer relationships and the company’s image.
Without proper contract risk management, organizations may breach the terms and conditions of a contractual agreement. Even accidental violations of stipulations can lead to litigations. No organization wants to end up in any kind of legal trouble. Apart from ruining business relationships, it can also cause severe damage to a company’s reputation.
Whether major or minor, contractual risks never mean anything pleasant for organizations in the long run. Hence, businesses must employ every risk assessment tool available in their arsenal to take care of weaknesses before they become an issue. The first step is identifying all the risks in your contracts and processes. Integrating CMS with Salesforce enables contract managers to predict contractual risks’ occurrence and impact.
Contract data in the wrong hands can lead to lasting consequences. When organizations employ manual methods to create and manage contractual agreements, there is a higher chance of data leakage. There are many ways to lose important files or information when working with emails, spreadsheets, etc.
In Salesforce contract management, organizations get a single secure location to store sensitive customer and contract data. They do not have to shuffle between different platforms for contract management. They can create, negotiate, sign, execute, and renew sales agreements without leaving the Salesforce platform. Consequently, all your crucial files are fully secure and in a cloud-based repository. There is no possibility of misplacing or unauthorized access to legal documents.
Missing significant dates in a contract lifecycle can have financial repercussions. With a CMS-integrated Salesforce platform, organizations can set up obligation and task tracking to stay on top of all the high-priority contract dates. Contract managers can initiate overdue actions to get timely reminders for a review, renewal, or expiry.
And thanks to the integrated system, the task of monitoring contract milestones is not limited to the legal department. The salespeople can stay apprised of the entire contract lifecycle from the Salesforce platform. Consequently, the organization never misses renewals or termination dates and can avoid monetary and legal risks. And the integrated systems’ invoice function also helps to ensure timely payments and financial optimization.
Keeping track of all the changes in a contracting process involving several parties is a never-ending chore. And if any of the stakeholders do not have the latest legal document available, then that is just asking for trouble. It is crucial to maintain version control throughout the contract's lifecycle.
Salesforce contract management comes with the perks of contract redlining and real-time document status. Through redlining, the stakeholders can stay on top of contract versions during the negotiation process. Also, any time anyone edits the legal document, all the involved parties receive updates when they open the file. Thus, from sales to clients, all are kept aware of the progress. And with the version history always available, organizations can easily keep track of changes and avoid inaccurate contract versions.
Ensuring complete contract compliance is one sure-cut way to avoid contract risks. And one of the main reasons for non-compliance is inefficient contractual agreements. The sales staff can use pre-approved templates and clauses to construct compliant and standardized legal contracts with a Salesforce contract management system. It mitigates the risk associated with contract language and legality.
As the integrated system automates the contracting process from end-to-end, businesses can avoid unnecessary delays and hurdles. The salespeople can monitor the contracting process and eliminate any pitfalls.
Moreover, Salesforce contract management enables users to auto-populate customer data to create error-free contractual agreements. Consequently, organizations can entirely get rid of human inaccuracies and risks that come with it.
For scaling businesses, contractual agreements contain lots of sensitive information that needs to be protected at all costs. Even within an organization, all employees do not require unlimited access to the entire contract process. Because if everyone can go through the legal documents without conditions, there is always the possibility of leakage and unaccountability.
Organizations can initiate the user permission function for the contract management process with a CMS-integrated Salesforce system. It enables businesses to clearly define and allocate responsibilities and accountability among the sales and legal teams. Thus, organizations can mitigate the risks that come with unauthorized access.
For efficient contract risk management, every team involved in the contract lifecycle must be part of the process. A cross-functional team makes it possible to identify and mitigate as many risks as possible. Fortunately, Salesforce contract management provides a common platform for legal and other departments to collaborate on risk management.
The sales team can monitor the contract lifecycle and risks within the Salesforce platform. They can ensure the contracting process stays on course and remove avoidable obstacles. Moreover, the integrated system empowers stakeholders to contribute to contract risk management. Clients can provide direct and timely input through the Salesforce platform.
When the contracting process is smooth sailing, it benefits the organization and its customers. And for a seamless operation, businesses must identify and mitigate contract risks beforehand. Pitfalls are present throughout the contract management process. And contract managers cannot do much without the necessary tools and strategies.
Hence, organizations require the advanced capabilities of Salesforce contract management to manage contract risks effectively. The integrated system enables the sales and legal teams to productively collaborate on contract risk management. They can utilize obligation tracking, e-signatures, automated workflows, and reminders to ensure contract life progresses with minimum risks. With timely proactive actions, businesses can improve productivity, sales, and contract performance.
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