Whether it’s Legal or Sales, it’s important for every team to ensure they’re helping the company by being compliant.
Contracts alone help increase compliance, but within a contract there’s a lot more that can be done to enhance an organization’s compliance. Whether it’s through features in the contract management platform or the way the contract process is conducted, it’s important to be aware of where the opportunities for risk are and how they can be alleviated. Here’s the top ways a company can be sure their contracts are a tool for mitigating risk, not creating it.
The first step is creating templates for employees to use. Yet while most companies have templates for users to work from, whether or not they are actually using them or even using the most recent one is a different story. Keeping templates in the same place people are creating documents from is key to ensuring compliance (e.g., working from a contract lifecycle management platform, not from a repository where users can save a template onto their desktop and continue to use it regardless of if updates are made). A single source of truth for documents and processes is key to compliance, and in this case, it can mean the difference between an updated clause that’s compliant with the most recent regulations, or an outdated version that could get the company into legal trouble.
Templates don’t just mitigate risk—they make it easier for all parties to comply with the rules and progress business faster. While everyone should be mindful of compliance regardless of how easy it is, making the process simpler for users increases adoption of new rules and regulations.
Even if a contract is created from a template, negotiations are often part of the process, changing certain clauses and terms from their original form. If this is the case, each legal department still needs to review the final version before approving. In the past, this often looked like repeated emails asking Legal to look at a document, or even having to track down someone in person. Approval workflows again not only make the process easier for the user, but they ensure compliance by not allowing a contract to continue forward in the process unless the right parties approve. In another step that makes compliance easier to adopt, approval workflows can be preset so that the same people can be added to every contract they need to approve.
The contract is just the first step in beginning a successful business relationship. Negotiation and working through the process together to ensure the best deal possible strengthen the initial connection between two organizations. Tension and conflict where one side feels unheard or disrespected is likely to end in unhappy partners and legal battles. Even if a deal starts to go south, having cordial relationships that are functional for working situations go a long way in keeping the peace.
Part of how good relationships are maintained is through healthy communication. Companies often want to hold off on bad news or ignore small issues that arise in order to keep the image of a good deal on the surface. Yet addressing these things immediately can alleviate tension if anything does go awry, and build trust for the future, as the other party now feels assured that they will be notified if anything is amiss. In addition to this communication, planning is key to making sure the other party knows what situation to expect even if things don’t always go as planned. While it’s important to address anything that is veering from the original plan, it’s also important to let the other party know how these things will be resolved. Even if one side has to be the bearer of bad news, knowing that they are working on a way to make things right helps the other side feel more assured, listened to, and respected. Good communication increases compliance as all sides feel comfortable addressing any issue without escalating it immediately to a legal battle.
Communication is also vital when it comes to negotiation, rules, and regulations. With online redlining, editing, and comments, users can adjust the original terms while informing the other party the reason for the conditions. Both sides can ensure they are maintaining compliance for the rules within their organization and region with simple, thorough communication.
Compliance is one of the most important aspects of a contract that needs to be thought out from the very first draft all the way through to renewals and a continued relationship. Ensuring these four things are a part of every contract lifecycle will help an organization mitigate risk and thrive in contract processes.