What is the goal of contract management? This question is essential for legal operations professionals to ask themselves when forming their approaches to better governance over processes. This post will outline the five key goals of contract management. Understanding these goals is the first step to optimizing contract processes and driving better business outcomes.
1. Ensuring Compliance & Obligation Fulfillment
One basic goal of contract management is that all parties involved adhere to the terms and conditions outlined in a contract. Achieving this goal protects both parties of a contract from legal disputes, financial losses, and reputational damage while fostering trust and healthy relationships.
A contract manager can ensure compliance and obligation fulfillment with unambiguous contract language, ongoing performance monitoring against terms and conditions, and open collaboration. Training and communication about compliance process optimization, including strategies that leverage contract management software and other functionality for better legal operations, are recommended.
2. Risk Reduction
Another key purpose of contract management is identifying and mitigating potential risks associated with contracts - such as financial losses and non-compliance.
A contract manager can reduce risk by proactively identifying, assessing, and mitigating potential issues throughout the entire contract lifecycle before these issues become untenable. Due diligence via thorough research and assessment of counterparties can reduce risk from the onset. Clear contract drafting can minimize risks associated with misinterpretation of a contract. Using risk assessment tools - such as a visually engaging risk and opportunity assessment matrix - is highly recommended.
3. Optimizing Operations
Our third common goal of contract lifecycle management is streamlining processes, reducing costs, and improving efficiency. This holistic objective requires a well-managed contract lifecycle in which all parties clearly understand their roles and responsibilities while increasing the ROI of tools and functionality.
A contract manager can achieve this goal in part by standardizing processes for requests, intake, contracts, and workflows. This standardization can be accomplished with a user-friendly request and intake wizard, the seamless merging of pre-approved templates and clauses, and intelligent workflow automation with clear, pre-configured steps. Detailed version tracking and audit trails can eliminate process confusion and provide a holistic view of contract-related operations. Additionally, retaining a single source of truth for contract data, documents, and lifecycle actions is recommended.
4. Facilitating Business Relationships
The people-centric goal of contract management is to establish and maintain strong working relationships between stakeholders and parties. This objective can be achieved when contracts are well-managed, fair, transparent, and mutually beneficial.
The importance of contractual relationships cannot be overstated. The success of legal operations hinges on the strength of these relationships. Building and maintaining strong contract relationships is not just about one-time signatures; it encompasses the full package of management. Here are a few tips.
- Be clear from the start. Set expectations early in the contract lifecycle process. Be clear on every detail and produce unambiguous clauses. Consider utilizing generative contract AI for generating and optimizing clauses, automating data extraction, and more.
- Communicate openly. After a contract is signed, don't stop communicating. Periodically contact your counterparty to make sure the agreement is being honored, and the relationship is sturdy. You might want to consider leveraging intelligent workflow automation to proactively schedule contract reviews and check-ins.
- Use contract management software. Overseeing many contracts can become difficult as volume and complexity grow. Contract lifecycle management software can assist you in efficiently organizing, monitoring, executing, and renewing multiple contracts - expanding and strengthening contractual relationships.
- Review periodically. Markets, businesses, institutions, and needs evolve. Ensure that your contractual relationships evolve, too. Regularly review your agreements and relationships to ensure that they still serve the intended purpose.
5. Supporting Decision-Making
Our final goal for contract management is the use of valuable data and insights to make informed decisions about contract renewals, terminations, and other important contract lifecycle choices.
A contract manager can leverage insights into contract performance, risk, and compliance. This diligence enables informed choices regarding trends, risk management strategies, areas of improvement, cost savings opportunities, and more. With a centralized platform for ensuring that everyone is on the same page - such as contract management software- the most correct and informed choices can be confidently made.
So, what is the goal of contract management? It's multifaceted - encompassing a desire for safer contracts, due diligence, proactive analytics, a more efficient process, stronger relationships, and better decision-making.
Knowing is half the battle, but contract managers also need the right tools for the job. CobbleStone Contract Insight® contract management software boasts a 96 percent customer satisfaction rate, helping contract managers across ranging industries to achieve and exceed these five contract management goals and many others.
*So, book a risk-free, free demo of CobbleStone® today to see what all the hype is about!*
*Legal Disclaimer: This article is not legal advice. The content of this article is for general informational and educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorney for legal advice regarding any particular legal matter.
