New Blog: Proverbs To Improve Contract Risk Mitigation
Proverbs have been around for nearly as long as words have, and these small pieces of wisdom are usually passed down through hundreds of years of generations. While most people see them as personal guidelines, businesses stand to learn something from a good proverb as well.
Let’s take a closer look at a few business-friendly proverbs that companies can keep in mind in order to help mitigate contractual risks.
The Basics of Contract Risks
Before exploring a couple of helpful proverbs, it’s important to understand what is meant when risks are discussed in a contractual setting.
A risk is simply the negative outcome that can result when a decision is made. The opposite of a risk is a reward. For example, if you’re asked to host a workplace meeting, you could either read the presentation notes so that you’re fully informed about the topic at hand, or you could skip the notes and wing the meeting. The latter option would be taking a risk.
In order to avoid hosting the meeting poorly, you’ll likely opt to read the presentation notes. This action is an act of risk mitigation. With risk mitigation, individuals actively take steps to minimize their chances of having to take risks.
However, there are times when risk mitigation is not so easy, and there are also times when risks are completely out of one business’s hands. Even if you have mitigated as many risks as you can, trouble can arise.
Take for example a delivery driver who has a product to deliver within a time allotment. He or she could have done everything possible to ensure a timely delivery, but if a sudden weather anomaly blocks all of the major roads, the outcome is not the driver’s fault.
This incident would be a contract risk.
Let’s explore two key proverbs that can benefit businesses and prevent unnecessary risks along the contract lifecycle management process.
“Forewarned and forearmed, to be prepared is half the victory.”
A forewarning about a risk is never meant to result in no action. When businesses are aware of possible threats along the way, it’s advisable to prepare for the risk as soon as possible.
Being prepared long before a risk becomes a reality is a great way to mitigate contract risks for any company.
“Expect the unexpected, and prepare for the worst so that the best happens.”
This simple proverb is risk mitigation in summary. When it comes to contractual possibilities and obligations, it’s crucial to examine all pieces of the potential puzzle. By carefully preparing for an array of different outcomes, businesses can reap the benefits of good planning.
Breakdown of Proverbs
To improve risk mitigation and ensure that a given business is prepared for what is to come as quickly and efficiently as possible, follow the steps below.
- Ensure that your contract data is visible. Contract data can contain a myriad of useful information regarding the contract’s lifecycle. It contains important dates, obligations, rights, prices, restrictions, and performance measures. By ensuring that all involved parties have access to this critical data, businesses are more likely to plan accordingly and less likely to “miss” important information.
Types of Contract Visibility
There are two key ways to approach contract visibility, reactive visibility and proactive visibility.
Reactive visibility refers to the way businesses use physical labor to locate their contracts, as well as the added help of an automated system. These CLM systems help businesses to perform the following tasks as needed:
- Providing access to contract data as needed
- Collecting contract-related documents
- Searching for relevant contract information
- Creating and storing searchable contract versions
This type is called reactive visibility because the actions are initiated as a response to an inquiry. It has its uses, but isn’t terribly efficient when it comes to proper risk mitigation.
Proactive visibility is the act of finding and providing information that’s needed ahead of schedule. This type of visibility encourages ownership and accountability over performance. This type of visibility empowers teams to ensure that the right people see the right information on the right timeline. It is the opposite of reactive visibility.
When using proactive visibility, individuals studying the contract data are expected to get key pieces of information pushed to the right teams as soon as possible. Additionally, recipients of that information are encouraged to go over the data as soon as possible to avoid incurring any risks.
- Use contract summaries. By using contract summaries, teams can reduce the content needed to its basic form. Summarizing saves both time and money, allowing individuals to absorb the key points of a given contract without having to skim through page after page of legal jargon they’re likely not going to remember.
Summaries, on top of being useful, can also keep new teammates in the loop if they enter the working environment in the middle of a contract. Rather than having them have to scan through every document involved in the process, a simple summary can help them be aware of the most important aspects of the project.
Several key points to have listed within a summary are as follows:
- Data detection– In order to develop a decent summary, contract management teams will need to have a legally-proficient individual or group read through the documents involved in a contract to determine exactly which pieces of data are key for the summary.
- Categorization- After determining the key pieces of information needed for the summary, those pieces of information should be categorized in some manner that makes them easy to find.
- Translation- All of the complicated legal jargon used in the contract documentation should be translated to plain, easy-to-understand language so that every individual reading the summary can glean information from it.
- Ownership- It’s important to determine which individuals are responsible for pieces of data that are used in the summary. Whether the owner of the data is a contract management team member or someone on the legal team, it’s important to have someone take ownership of the contract and discuss updates with necessary teams as time passes.
- Status- Keeping an eye on the contract’s status is necessary when it comes to being aware of due dates or the possible ending of a contract. Monitoring contract statuses closely will ensure that teams are prepared to handle all aspects of contractual changes.
- Revisions- After having team members view the contract summary, reviews and revisions may be necessary for clarity. It’s common to have things become overlooked during the writing of the first draft, so the team’s input is crucial in this phase.
Anticipating and mitigating risks before they become serious issues is a crucial part of contract lifecycle management. By being ready for any possible outcome, businesses can always be prepared for the outcome that occurs. Better still, they can bend outcomes to their favor by anticipating bumps in the road and correcting them before they change the course of a contract.