Contract Management Challenges and Practical Solutions
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1 Contract Management Challenges and Practical Solutions Olivier FISCHER, Managing Director of LS Canada Laurelly DALE, In-House Counsel at Dye & Durham
2 LS Canada Inc. All rights reserved Introduction of Speakers Dye & Durham and Legal Suite Laurelly Dale B.A, L.L.B. In-House Counsel Olivier Fischer MBA; M.Sc. Managing Director
3 LS Canada Inc. All rights reserved Legal Suite : Software By and For In-house Counsel Litigation Management Contracts Legal advising Risk Management Legal Reporting Corporate Budget Delegation of powers Library Time Management Legal Directory IP Assets Real Estate
4 LS Canada Inc. All rights reserved Contract management Challenges In a recent study, according to 42% of companies, the top driver for improvements in the management of contracts is the pressure to better assess and mitigate risks. Additionally, nearly 65% of companies report that contract lifecycle management (CLM) has improved exposure to financial and legal risk, according to the new "Contract Lifecycle Management and the CFO" report. *published by the Aberdeen Group, a Harte-Hanks Company (NYSE: HHS).
5 LS Canada Inc. All rights reserved Contract management Challenges AN EVER GROWING CONTRACTUAL LOAD Among the Fortune 1000 companies, the average amount of current contractual files is between 20,000 and 40,000, a 20% increase over the last 5 years. *Institute for Supply Management A CONSIDERABLE AMOUNT OF DOCUMENTS The difficulty of the contractual process comes from the fact that it is highly document based and involves many players. This type of process requires the manipulation of qualitative information the traditional data processing applications cannot handle. *Lettre des Achats N140
6 LS Canada Inc. All rights reserved Contract management Challenges A FAILURE IN CONTRACTUAL MANAGEMENT Approximately 10% of the contracts are lost, regardless of the industry. Considered by many as an inherent cost to business activities, it is actually the result of a failure in contractual management. *PriceWaterhouseCoopers AN UNDER-DEVELOPED CONTRACTUAL MANAGEMENT Contractual management stands where finance was 30 years ago. *Oracle
7 LS Canada Inc. All rights reserved Main drivers to improve Contract Management Accessible and reusable Capitalize on best practices Leverage expertise Improve service to internal customers Improve your risk management Improve your role and communicate your value
8 LS Canada Inc. All rights reserved Contractual Cycle Planning Negotiation Drafting Validation Execution Guidance PROJECT PHASE CONTRACT GENERATING PHASE CONTRACTUAL PHASE Pre-contractual Contracts in force Major contacts Description of the project Planning (alerts) Process (negotiations follow-up, time spent) Library of models and clauses Best practices Generation of documents (contracts, letters) Validation circuit Version management (current files) Signature Duration (renewal notice, termination) Key clauses (sensitive obligations, mutual) Financial stakes Contract management (followup, dispute, alerts) Additional clauses Dashboard
9 Step Back and Assess Most offices will already have a manual filing system. For those that do not have a CRM/Sharepoint, the following can be created using: Microsoft Excel; Microsoft Outlook and Word.
10 Knowledge Management Technology LS Canada Inc. All rights reserved
11 Contract Life Cycle Management Adoption LS Canada Inc. All rights reserved
12 LS Canada Inc. All rights reserved Knowledge Management Solution Build your contract management system Central database Shared platform (multiple sites, cities, countries) Powerful search engines Quick retrieval of contractual information Save time on real legal value It will be your legal knowledge management solution Your legal know-how is an asset Your interpretation is the service you provide Objective : taking control over information
13 LS Canada Inc. All rights reserved Contract Management Project 1. Assess your contractual activity 2. Build a business case with a list of requirements 3. Get budget/project approval 4. Implement the application using a project management approach 5. Go live
14 LS Canada Inc. All rights reserved Assess your contractual activity Define the contractual activity of your organization: Volume, Risks involved, Importance, Priority, Deadlines, Value, Localisation Define people involved in the contractual lifecycle: Internal customers to serve (sales, marketing, IT?) Approval process Role of legal Understand your internal customers objectives You can t manage what you can t measure
15 From the Beginning NEED TO: request copies of all contracts from managers/executives/president by a certain date. Hold a brief meeting if necessary to explain two filing systems, elimination of redundant files, and creation of memos to file. Once obtained, create Master Contracts List BEFORE organizing contracts. Set aside at least two business days (depending on how many contracts you have to review). At each addition, you should review the contract and pull out: renewal dates; termination clause; expiry, etc. Dual filing systems.
16 LS Canada Inc. All rights reserved Build your business case Should include: Problems to be solved Objectives to be reached Departments involved (legal, IT, other) Budget Timeframe ROI
17 LS Canada Inc. All rights reserved Build your business case Consider : 1. Legacy Data Importance of information (relevance, age ) Form: soft vs hard copy Location (where are the documents?) Integrity 2. Connection with other systems Tailored to your project s scope, to have A unique central point of data COTS and customisation (if required)
18 LS Canada Inc. All rights reserved Get budget/project approval Get buy-in from IT/management/ potential users (legal, other ) Try to have most people on-board (but less on project phase) Keep in mind that you will never have everybody on-board (reluctance to change) Get Budget approval (possibly resources)
19 Implementation Phase Assign two Project Managers: Legal and IT Give them time and power and delegate Set up clear objectives and deadlines: Set up a calendar and stick to it Milestones Go-live date Do not change objectives during project Impact on budget LS Canada Inc. All rights reserved
20 Here is the Project MASTER CONTRACTS LIST Updated Monthly in RED Subject Heading in alphabetical order Notations ELECTRONIC ORGANIZATION VS. MANUAL IT assistance, President s discretion Most updated list should be electronic Memo to File
21 LS Canada Inc. All rights reserved Go live Work with the tool Terminology is important Training, training, training (legal department and other) Communicate the results
22 LS Canada Inc. All rights reserved Key Reminders Do not underestimate Change management Business processes and corporate culture Security and information access Access and user rights (people and departments involved)
23 Evaluation Results Achieved Timelines Benefits On-going work
24 Business Case #1 Structure of legal department: 3 lawyers and a legal assistant; first in-house lawyer hired in 2002 Supports all business operations across Canada Provides a full range of legal services including: preparation, review and drafting of contracts, legal research and analysis, dispute resolution, intellectual property management, government relations, privacy office litigation management. LS Canada Inc. All rights reserved
25 Business Case #1 LS Canada Inc. All rights reserved Original Contract Management Database Assessment of the internal solution Homegrown inexpensive but somewhat difficult to support (difficulty to get internal resources available) No way to: capture significant contracts terms and deadlines manage workflows capture time spent on files assess workload run reports Difficulty to track information (link to documents often broken)
26 Business Case #1 LS Canada Inc. All rights reserved Results: 6,550 legacy agreements transferred Benefits Efficient Reporting Notifications: no missed deadlines missed Centralized database (documents, s ) Easy links to related agreements in the database Tracking time spent Custom workflow for tracking requests
27 Business Case #2 Context Basic IT tools such as Excel and Access Turnover within the legal team: loss of memory Maintenance problem Each lawyer would manage his/her own contract database Need to centralize and structure file management LS Canada Inc. All rights reserved
28 Business Case #2 LS Canada Inc. All rights reserved Benefits Shared information : Better visibility Better transparency Easy ad-hoc reports for the Swiss holding company Technical aspects : reliable tool, ongoing and scalable, multilingual User friendly
29 LS Canada Inc. All rights reserved Return On Investment «ROI: Ratio of money gained or lost on an investment relative to the amount of money invested.» Source : wikipedia It s all about (time and) money
30 LS Canada Inc. All rights reserved Return On Investment If legal department is a cost center, then compare the money lost without a solution $CA vs Risk Management Usually based on problems Without reporting capability, measure previous situation is complex
31 LS Canada Inc. All rights reserved Return On Inevestment CAPEX < avoided OPEX Avoided costs: legal department & business units penalty fines - cancellation fees Risk management Productivity gain
32 Business Case #3 LS Canada Inc. All rights reserved The company: Leading North-American manufacturer of engineered wooden products. Annual sales exceed $550 million 1,400 employees. 8 business units in North America Legal Department: Small team : 1-2 lawyers Mainly contract management (500 active contracts) Budget and resources constrained
33 Business Case #3 Drivers? Authenticity and accessibility of the information Compliance Consistency of information: repository of contracts to capitalize on best practices Control over the contracts (deadlines, key information ) Efficiency LS Canada Inc. All rights reserved
34 Business Case #3 For the business Direct access to contracts Direct reminders to the contract administrator and heads of department Reports (per supplier, client, team member, etc.) The right information at the right time and at the right place LS Canada Inc. All rights reserved
35 Business Case #3 For your legal department One less bottleneck, one less cost The machine does the work Don t be shy! Share the information with the business Up to speed when you report to management and auditors LS Canada Inc. All rights reserved
36 Business Case #3 LS Canada Inc. All rights reserved Compliance Contracts in place, in a timely fashion Clients are kept happy Regulatory compliance is key Auditors are kept happy
37 Business Case #3 LS Canada Inc. All rights reserved Risk Management Renewals Track important clauses such as right of first refusal, exclusivity, etc. Integrity of the contract database Autonomy of the business visibility on contract management Uniformity control of processes
38 Business Case #4 LS Canada Inc. All rights reserved Company Overview: Global, innovative-driven biopharmaceutical company. Over 57,000 people worldwide in +100 countries. Legal Department: Support the strategic direction and objectives Established in 2003: 2 in-house counsel, 1 law clerk Ensure local business operations are legally compliant Identification and Management of risks
39 Business Case #4 Contract Management - Past Common drive (L:Drive) with restricted access for Legal Department only, and s to manage day to day activities Company wide document management system for contract archiving purposes Captured no information other than title of document Poor searching capabilities Not time efficient Loss of data common due to system complexities Not intuitive Offered no additional functionality targeted specifically for legal documentation 39 LS Canada Inc. All rights reserved
40 Business Case #4 LS Canada Inc. All rights reserved Contract Management - Current Practice Use Legal Suite Application Links agreements with amendments or other key documents System is very flexible and can be adapted to individual department needs Powerful Searching and reporting capabilities Time saver Better access and sharing of information Lesson learned: Work together and seek input from all stakeholders: all users should be clear on the purpose and adequation of the system
41 LS Canada Inc. All rights reserved Final Recommendations Contract Management is not just a document management solution Requirements, needs and expectations are different System chosen will depend on the volume of contracts Use the 80/20 rule Use the K.I.S.S. rule Define a timeline, respect it, do it gradually Seek buy-in from your team and your internal clients (business people) Speak their language Get your technical support department involved as soon as you can In-house counsel are business partners and they prove it.
42 QUESTIONS?
43 Thank you for your participation! Contact information Laurelly Dale Olivier Fischer
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