The Role of Contract Lifecycle

Management in Cost Control, Risk

Management and Regulatory Compliance

Companies manage thousands of active contracts with numerous clauses, terms and amend- ments. All of these contracts accomplish one primary task: they define the business relationship and allocate risk between parties. In doing so, they also:

• Manage financial terms	• Establish key performance indicators
• Establish delivery of product/	• Reduce exposure to financial and
service levels	legal risk

•Memorialize all contractual obliga- tions, including the risk elements of the contract

Left unadministered or administered poorly, contracts virtually always underperform their revenue potential on the sell side, raise costs on the buy side and increase the risk of many legal and compliance issues. In fact, the failure to actively manage contracts from conception to close-out costs organizations billions of dollars every year.

Further contributing to the dire need for more effective contract administration are significant pressures over and above the volume and inherent complexity of the contracts. Regulations that require companies to establish and document business control procedures for tracking and reporting material business information grow more rigorous every year. Globalization has multiplied the types and complexity of contracts as well as the risks associated with contractual relationships. Even licensing, channel and warranty agreements are increasing in both number and complexity.

For 42% of enterprises, the top driver of improvements in the management of contracts is the pressure to better assess and mitigate risks.

Contract Lifecycle Management (CLM) is defined as “All of the tasks required to source, award, administer and close out a contract for services, goods and/or equipment between two or more parties.” Some of the more significant tasks include:

CLM can be summarized as the process of systematically and efficiently managing sourcing, contract creation, execution and analysis for the purpose of maximizing financial and operational performance and minimizing risk.

However, Contract Administration's role in CLM is frequently not a clearly defined business function. It spans a very wide reach through numerous departments and people and, as a result, everyone defines it differently. Key factors to successful Contract Administration include:

Nearly 65% of enterprises report that Contract Lifecycle Management has reduced exposure to financial and legal risk when properly administered.

As important as Contract Administration's role is in CLM for enhancing contractor/supplier performance, its greatest long-term value is in risk management. Contract Administration improves contract visibility, control and reporting – enabling operations, major projects, HSE, legal and regulatory affairs departments to mitigate risk.

Ineffective management of the compliance component of CLM due to ineffective Contract Administration results in the loss of full contract value and invalidated risk provisions. Some examples include:

Revenew's years of contract compliance work and auditing experience have revealed that, unfortunately, many organizations administer contracts via a series of inefficient, manual and disjointed processes. Such an approach increases costly errors and practically guarantees that milestones will pass with obligations unsatisfied and performance improvement opportunities squandered.

Revenew's Contract Administration process solutions eliminate common bottlenecks across the contract lifecycle, enabling your organization to:

Our aggressive approach to CLM and Contract Administration allows your business to speed up deployment, reduce disruption to work routines, improve risk management and accelerate your return on investment.