There’s no question the need for digital transformation accelerated greatly during the COVD-19 pandemic with no signs of slowing as we start to get back to normal. That said, many in-house legal departments have lagged in supporting their company’s digital transformation strategies, but it’s not for lack of trying.
While chief legal officers (CLOs), general counsels (GCs) and their in-house legal teams want to serve their clients in the most strategic and effective manner possible, too much of their valuable time is spent chasing down routine requests across various departments and managing multiple workflows involving numerous stakeholders, introducing complexity into any kind of transformation. All of this takes CLOs and GCs away from the critical task of mitigating risk and ensuring compliance.
According to a Deloitte survey, more than half of CLOs said that recurring tasks and data management constraints kept them from creating value. Functional silos can be disruptive and the way workflows are structured often makes key performance indicators (KPIs) difficult to track and evaluate. That said, digital transformation is imperative and firms that embraced technology during the pandemic outpaced the competition. Research confirmed that leading organizations see digital transformation and technology as a key driver of improved performance, efficiency and productivity, and that increased use of and investment in it will continue.
Legal and legal ops teams are no exception and can take on a leadership role in their organization’s broader digital transformation strategies. But where to begin? With so many legaltech solutions available to help increase productivity and efficiency, it’s easy to get overwhelmed or invest in technology for technology’s sake. A more prudent and proven approach would be to start with the often-overlooked backbone of every modern organization: contracts. Why? Because contracts define and are foundational to your business relationships.
The fact is, however, that many teams still embrace a traditional and manual approach to managing legal agreements. Often, this involves messy and hard-to-maintain spreadsheets to track dates and other important information, unsecure and hard to search shared drives for document storage, and email for managing reviews and approvals, making version control an absolute nightmare. If contracts hold the key to in-house legal’s digital transformation, then the way you manage contracts must also be digitally transformed.
Enter Digital Contract Transformation
Digital contract transformation or DCX is all about the digitization of contracts and contract lifecycle management (CLM) processes. It gives legal departments the ability to modernize, streamline, and automate their contracting efforts as well as harness the wealth of data available in contracts to deliver the business actionable insights. After all, digital transformation is all about data and using it to evolve your business. The end result of DCX for GCs and CLOs is far less risk, greater compliance, and the ability to finalize business faster. Let's look at the four main ways this can be made possible using legaltech such as contract management software.
1. CLM Process Automation
Manual processes are a huge time suck for GCs and their teams. They are also very error-prone given the high degree of human touch required, resulting in unnecessary risk. Using contract management software to automate the CLM process from the moment a contract is requested through the creation, negotiation, approval, execution, and ongoing management of it is key to mitigating risk and increasing compliance. With automated workflows, business rules are always followed with efficiency and speed. And automating alerts, tasks, and other notifications associated with contracts helps eliminate missed obligations, dates, milestones, and other critical items.
2. Better Collaboration
Every corporate lawyer knows that negotiating even the easiest contract involves multiple stakeholders and multiple reviews. The World Commerce and Contracting group estimates that the average cost of processing and reviewing a negotiated contract continues to rise and can range from $6,900 for a simple contract to more than $49,000 for complex agreements. These costs introduce risk and delays, and it’s not uncommon for slow negotiations to kill a deal. A frictionless collaboration environment using modern collaboration tools helps finalize business faster. Lawyers can easily and quickly negotiate contracts internally and with third parties using concurrent editing, automatic and accurate version tracking, real-time messaging, and e-signatures – without ever having to leave the contract management software.
3. Actionable Business Intelligence
Harnessing the data in legal agreements gives GCs and their staff the ability to benchmark and track KPIs that can be used to optimize the performance of contracts and contract management processes. For example, an organization can benchmark the current average total number of days in a contract lifecycle and identify opportunities to improve it. Another example of a KPI focused on the pre-award phase of a contract is understanding the average time to reach and execute each contract milestone like requesting an agreement, drafting one, or negotiating it. By benchmarking and tracking KPIs based on data made available through digital transformation, GCs can provide the business with strategic intelligence not previously available to them.
4. Greater Security
It’s not a surprise that contracts contain some of the most sensitive and confidential information about businesses, customers, partners, employees, and vendors. However, most legal agreements are freely accessible and shareable due to the nature of being stored in shared drives. In many cases, they can even be inadvertently deleted or misplaced. This is increasingly problematic and exposes the business to major risk with severe consequences as the number of data breaches and cyber-attacks continues to skyrocket around the blog. 85 percent of data breaches last year involved a human element, but by digitizing contracts and processes and centralizing that data in a secure contract management repository, GCs can now confidently regulate access to that information. Capabilities like role-based and feature-based permissions ensure the appropriate people and groups have access to the right information. Other security features and certifications like SOC 2 Type II, HIPAA, and FISMA will keep the IT department happy and contract data safe.
The role that automation, centralized management, real-time analytics, collaboration, and improved security plays in CLM can help any in-house legal team streamline the routine onerous tasks CLOs said were holding them back, while reducing risk and satisfying compliance requirements. A modern contract management system that facilitates DCX gives legal departments the data they need to support and lead digital transformation strategies with additional visibility into all contracts and contract data. With this transformative approach, departments can extract value from the information within their contracts, optimize those legal agreements, and then provide a tangible ROI to the business. Less risk, greater compliance and an ability to get business done faster is a win for all parties!
Published August 4, 2021.