Contract Management is the process of managing contract creation, execution, and analysis. As organizations look to reduce risk and improve operational efficiency, contract management has shifted from a back-office conversation to a way of gaining competitive advantage. Contract management solutions offer a compelling opportunity to automate key processes across the contract lifecycle, capitalizing on innovations in contract generation, collaboration, e-signature, workflow, and analytics.
Here are seven of the most impactful contract management trends to watch.
1. Smart contracts
Smart contract code automates performance of key aspects of agreements based on data inputs—whether from internal or external systems. Effective, straightforward use cases include:
- automatically applying pre-determined discounts for purchases from key suppliers
- routinely confirming credentials or eligibility for employees and contractors
- calculating and issuing payments based on conditional factors like shipping requirements or SLA fulfillment
What’s exciting is the growing recognition that smart contract code doesn’t require blockchain and can be embedded in traditional legal contracts. The rise of cloud-based “smart legal contracts” means that enterprises can start reaping the benefits of contract automation today.
2. Data privacy
Welcome to the Decade of Data Privacy. While Canada was early to recognize the importance of protecting commercial data with the Personal Information Protection and Electronic Documents Act (PIPEDA) enacted in 2000, UK’s GDPR (General Data Protection Regulation) is just into its second year, and California’s CCPA only became active on New Year’s Day 2020.
Organizations are realizing that data privacy compliance isn’t a one-and-done effort, but an ongoing commitment. It starts with knowing what’s in your existing agreements and includes any entity with whom you share data. From there it extends to countless interactions with customers and employees—delivering adequate notifications, collecting provable consent, and fulfilling access requests in a way that is not only compliant but also builds customer trust.
Most agreement systems today are ill-equipped to meet these challenges, but leveraging contract AI, electronic signature, and digital contract lifecycle management (CLM) will go a long way to address data privacy compliance.
3. Contract AI
Whether to address data privacy, uncover capital opportunities, inform negotiations, or prepare for changing trade relationships (Brexit is real, folks!), organizations undeniably need to know what’s in their agreements. The twenties will see fast-waning tolerance for legal and procurement teams that can’t deliver transparency into their vast volumes of agreements.
Contract AI that intelligently converts text into clauses and concepts that can be searched, filtered, and compared, will eventually become de rigueur. But the most promising change is the rethinking of contracts as modular, digital entities right from inception, informed by all that’s gone before. This represents a leveraging of the lessons surfaced by contract AI to make all of an organization’s agreements—and agreement processes—smarter.
4. Climate-aware contracting
According to a 2019-published report by CDP, 215 of the world’s largest global companies are recognizing climate change as a serious threat to business—with nearly $1 trillion USD at risk. Nearly three-quarters of responding companies confirm that they have board-level oversight of climate-related risks. Because supply chains account for some 50-70% of corporate carbon emissions, climate-aware contracting with suppliers is a growing trend.
A first step for many companies is to know what’s in their agreements—identifying contracts and clauses dealing with (or failing to address) CO2 and other climate-impacting emissions. Digital contract technologies can help streamline the process of updating, re-negotiating, and executing supplier agreements without resorting to paper—reducing the climate impact of the agreement process itself. Among the many goals of contract management, helping to decarbonize existing relationships may be the most critical and impactful.
5. Digital identification
We all verify our identity every day—often multiple times—whether it’s entering a PIN into a point-of-sale machine or using fingerprint or face recognition to unlock a smartphone. But for important business contracts, such as opening a bank account or switching your wireless plan, industry regulations may require more thorough verification. In the past, that has meant in-person ID verification.
Digital alternatives are being tested around the world. Several U.S. states are piloting digital driver’s licenses and electronic IDs (eID) are gaining momentum in Australia, UK, Netherlands and the Nordics. Expect to see more eID programs evolve in the 2020s. Contract technologies that can leverage these emerging standards to confirm proof of identity online will simplify the experience for businesses and consumers alike.
6. Remote online notarization
Notarization is one of the most common processes that requires identity verification. In the past, this meant the signer had to appear in person before a Notary Public. Remote Online Notarization (RON) eliminates perhaps the largest frustration consumers have with notarization, having to physically be in the same location as the Notary. 22 states have now legalized RON (up from only 3 in 2018) and more states are poised to approve RON in 2020.
Note: online notarization is not yet available in Canada.
With RON, you can now get a document notarized from virtually anywhere whenever it is most convenient for the consumer. The Notary validates the identity of a digital signer via online video and electronically stamps the document to complete the process. Broad acceptance of RON in the coming years will improve the customer experience and increase digital adoption for numerous contracting use cases.
7. Customer and employee experience
Experiences will continue to be the primary driver of satisfaction for both customers and employees. We know customers place as high a value on the interactions they have with a company throughout the buying process as they do with the product or service they are buying.
In the coming years, we expect to see even more emphasis on personalized experiences and anticipating customer needs. In the contract world, this means making it easy to complete paperwork on a mobile device; PDFs that need to be downloaded, printed, filled in, signed and scanned just won’t cut it anymore.
At work, employees will demand similar digital experiences, both for forms they have to complete as well as processes they manage as a part of their job. Freeing employees from manual, paper processes lets them focus their time on more meaningful, strategic aspects of their roles.
As companies mature, the number of stakeholders involved and the complexity of the contract process will dramatically increase. Digital leaders need to stay on top contract management trends to do business faster, with less risk, at lower costs, and deliver better experiences for customers and employees.