In-house legal departments are the gatekeepers of all a business’ contracts: making sure the terms are favourable to the organisation, and that people can find the relevant documents when they need them. Since contracts underpin so many of a company’s fundamental operations, managing those contracts well is generally one of the most important and most time-consuming element of an in-house legal team’s work. There’s volume and detail to get through, and the bottom line is that the business’ ability to generate revenue relies on contracts that are up-to-date and fit-for-purpose.
Resource-strapped in-house teams simply can’t say no to the next contract or be unresponsive when a request for legacy documents comes in. Thankfully, the tools, know-how, and processes for handling contracts have advanced significantly in the past decade — improving efficiency and reducing the risk of error. Analysis powered by artificial intelligence (AI), workflow management tools, and collaboration portals all increase speed and effectiveness.
In fact, technology and tools have advanced so quickly that approaches that seemed wildly innovative five years ago are par for the course now.
So what does best practice look like in contract lifecycle management? Here are five key attributes:
Best practice tip #1: Contract management is collaborative
Effective contract management requires dozens of moving parts to work together. Each phase involves multiple steps and many different parties. To help each part move smoothly, you need a centralised contract management ecosystem that enables all stakeholders to collaborate through each phase.
When you are collaborating with business partners and other stakeholders, they’ll want to share thoughts and suggestions in comments, annotations, and tasks, and redline changes before the document is finalised and ready for signature. Getting the specifics right is easier when you use a system that ensures the team is always working from the latest version of a document.
When everyone and everything comes together, you have unprecedented control and visibility into contracting activities, workflows, approvals, documents, and metrics. This will speed up transactions and deliver greater value to the business while improving accuracy and lowering risk. This systematic, collaborative approach also gives you the ability to analyse every aspect of your contract portfolio and report on activity.
Best practice tip #2: Contract management is secure
Contracts are commercially sensitive and extremely confidential. Therefore, your approach to contract lifecycle management must include best-in-class data security.
First, make sure that your system is hosted in the most secure environment possible. Then, ensure that your provider offers secure private hosting in the cloud and stores your data in a Tier 3 — or higher — data centre that uses back-up and dual-powered servers.
At the application level, your security should include two-factor authentication to control access and offer the ability to encrypt documents. Finally, ensure that the people enforcing your provider’s security are experienced, screened, and working 24/7/365 to protect your data.
Best practice tip #3: Contract management is scalable and repeatable
Great contract management builds on what’s working and allows lawyers to focus on complex legal work without getting bogged down in the same basic, mundane tasks over and over again. It’s scalable and repeatable.
Colleagues in the business rely on the in-house legal team to provide easy, secure access to these documents. They need to ensure they are complying with the terms to which they agreed. Constantly searching and checking version control isn’t smart or sustainable.
A contract management system can keep your contracts well organised for easy access. It can also tell you who has worked on the document and when.
To ensure consistency, create and share pre-approved templates and clauses. Know-how resources available within Practical Law include model documents and checklists that can help you build your template library or solve new issues. You can also provide the business with self-service options for simple, straightforward contracts, further streamlining the drafting process. This frees your department to focus on more complex deals with higher-risk profiles.
Best practice tip #4: Contract management is matter-specific
While a good contract management system should be scalable and repeatable, it shouldn’t be limited to one-size-fits-all: solutions should allow for a matter-specific approach.
No two contracts are exactly alike. While you can borrow provisions from earlier work products, the drafting and negotiation of each matter must be custom. Copying and pasting key terms, obligations, and dates can lead to increased risk for the business — and the potential for missed value.
Contract management systems containing document review and analysis tools that leverage AI technology can help you identify specific provisions and work with business partners to make them work for their deal.
Best practice tip #5: Contract management is digital and mobile friendly
The collaborative nature of contract review and management means it’s critical that stakeholders can access, review, edit, and sign contracts and status updates anywhere, at any time, from any device. Reviewing, approving, and signing contracts when you aren’t at your desk is nearly impossible when using digital tools like electronic signatures or it’s not a mobile-friendly system.
Soon the days of emailing for approvals and chasing down signatures at the last minute will be gone. Workflows can eliminate these manual processes so that all the correct steps and approvals are met — speeding up contract execution and eliminating the risk that contracts are entered into without the right authority and approval.
With the legal department often seen as a cost centre — and businesses moving faster than ever — it’s critical that the in-house team keeps pace and shows its value. A contract management system that follows best practices — one that is collaborative, secure, scalable, matter-specific, and digital — can help the legal team drive results and build partnerships.
