Contract Compliance – Legal Best Practices for Your Business
When your company enters into an agreement with a third-party, your business is obligated to comply with industry-specific regulations. That is whether the regulations are domestic or international and whether your business is privately or publicly owned. So, ensuring your legal team keeps up with the latest regulatory standards – and your interdepartmental colleagues follow them – can be a fairly daunting task.
The good news is that cloud-based, integrated contract management systems (CMS) now support general counsels (GCs), attorneys, paralegals, and contract managers. And, such contract management software enables legal professionals to provide governance and transparency throughout the contract lifecycle.
So, here are five key contract management phases that help legal teams meet the organization’s unique compliance requirements.
1. CONTRACT CREATION OR CAPTURE PROCESS
Imagine your contract management team could easily access libraries of agreement templates, terms, and clauses, which are pre-vetted against the latest compliance requirements. What would that be worth to your organization?
What would be the value of being able to run your contracts through a thorough OCR process? To discover previously-lost insights from these agreements in your file repositories? If an auditor asked you to gather a set of agreements for a specific time frame, client, or employee, would you be able to gather what they need quickly enough?
Ensure sensitive contracts are protected from unauthorized access or distribution
Simply put, contract processes and policies should not be merely documented. They should be followed rather closely, and they should be understood completely.
2. INSIGHTS EXTRACTION
The legal department is not considered a top priority when businesses shop around for artificial intelligence (AI), predictive analytics, and other “big data” initiatives. But, that ought to change. Much of the metadata and unstructured elements of contracts are subject to regulatory standards, such as:
- Acceptance, payment, and pricing terms
- Contract termination and renewal terms
- Penalties for not complying with terms
- Indemnity clauses
So, powerful, AI-powered analytics engines – like IBM Watson and reporting applications like Microsoft Power BI -are quite useful to legal departments. Scheduled reports and ad hoc queries also ensure your business meets regulatory requirements and mitigates risk whenever possible. Ultimately, analytics of this caliber demonstrates unparalleled transparency.
3. CONTRACT REVIEW
Imagine you could delegate the task of reviewing contract language to a virtual legal assistant (VLA). Not to just review the contract as a standalone file, but to compare it against other contracts, clauses, and language in your repository.
The VLA can learn your risk tolerance levels and all of the regulatory requirements. If any problematic text or terms are identified, the bot can alert its human counterpart of anomalies that defy compliance and require immediate attention. So, the contracts can go “out the door” to clients, partners, suppliers, or other outside parties, with no delay in the cadence of negotiations.
A CMS can enable your GC to provide governance and transparency throughout the contract lifecycle. That also means you can identify any terms in your contracts that expose your organization to excessive and unacceptable risk; offer fallback alternatives, and meet the latest regional or industry compliance regulations.Therefore, you can best position your business to generate revenue and expand into new markets.
So, financial and legal auditors can see that your organization is maintaining every contract version – and any redlined changes – throughout the contract lifecycle. Not just the final signed agreements in your repository!
4. CONTRACT VERSION VETTING
After the final edits have been made to a contract during reviews or negotiations, a “clean” version for signing is produced. Then, a digital audit trail is stored and linked to that version. It includes the records of the contract author, plus those of their physical and virtual colleagues who modified, shared, or approved that particular contract version.
5. CONTRACT SECURITY AND DATA PRIVACY
Software as a Service (SaaS) applications, which are hosted on leading, cloud platforms like Microsoft Azure, take the risk out of the contract management equation. Auditors who may review your contract management processes will be pleased your CMS complies with security standards like:
- PCI-DSS for credit cards
- HIPAA for patient data encryption and privacy
- Bank-level, 256-bit encryption
So, sensitive contracts related to intellectual property, and mergers and acquisitions are then protected from unauthorized access or distribution.
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