Taking Control of Your Contracts: Best Practices for Contract Management. and

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1 Taking Control of Your Contracts: Best Practices for Contract Management and 1

2 Richard Waugh VP of Corporate Development at Zycus > Richard Waugh, VP Corporate Development at Zycus, has an extensive background in B2B E-Commerce, going back to his early career at GE, where he helped launch GE'S Trading Process Network (TPN), the first on-line Marketplace for Sourcing and Procurement in the mid 1990's. He was Co- Founder of B2eMarkets, one of the first SaaS (Software as a Service) Sourcing Suite providers and later covered the Supply Management market as an Industry Analyst for the Aberdeen Group. 2

3 Kalisha Crawford, Esq. Director of Legal Services at GreenPoint > Kalisha Crawford, Director of Legal Services at GreenPoint Global, is a former practicing litigator and a legal business development and client management professional. Kalisha has deep experience in the contract management and compliance arenas, with special attention to vendor contracts, agreement inventory and backlog, and provision analysis and organization. 3

4 Presentation Agenda Areas Covered > Who should be concerned with contract management? > Why do you need it? > What are the benefits? > How is it done? > What are my options? > Top 10 Takeaways 4

5 Why do we need contract management? Inefficiencies Cost Your Company Time and Money! > IACCM estimates that 9% of annual revenue is lost due to poor contract management > Estimates from 2004 projected $153 billion dollars annually are lost to inefficient contracting processes - Aberdeen Group > Errors cost a company up to 12% of their annual contract expenditures - PricewaterhouseCoopers > ERP Solutions only cover 20% - 30% of the needs of most enterprises - Goldman Sachs > SOX requires CFOs and CEOs to certify that they have evaluated the procedures and controls in their organizations and that they are effective 5

6 Why Should We Be Concerned About Contract Management? > You may have heard the quotation that roughly says Nothing is certain but death and taxes. > In our modern society there is a third certainty: CONTRACTS! > No matter what industry, your business has contracts - With suppliers - With customers - With employees > Time, Money, and Opportunity are lost every day due to poor contract management. > Industries - Insurance - Pharmaceutical - Healthcare - Retail - Government - Manufacturing - Financial Institutions - Software & Technology 6

7 Who Should Be Concerned About Contract Management? > Procurement and Sourcing Managers > Contract Managers > Compliance Managers > Regulatory Reporting functions > General Counsel > CLOs > CFOs 7

8 Benefits of Contract Management > Central Repository: Houses all documents (riders, amendments, etc.); searchable; accessible by all required users > Highly configurable: Scalable, customizable, back-end compliant > Monitor contract performance: Track timing, pricing, terms, and internal adherence to policies > Notification and Alerts: Receive notifications and alerts for milestone dates, auto-renewals, and opportunities for renegotiation > Vendor, Supplier and Customer Risk Management: Country and supplier risk ratings; outstanding litigation and other risks of doing business with vendors 8

9 Contract Management: Process Overview 9

10 Quiz Question #1 What do you think represents the average weekly loss a company suffers due to inefficient contracting processes: - $122,000 - $245,000 - $377,000 - $718,000 - $1,000,

11 Quiz Question #1 The average weekly loss a company suffers due to inefficient contracting processes: 1. $122, $245, $377, $718, $1,000,

12 Contract Management Lifecycle 12

13 Why should we engage a partner? 13

14 Why should we engage partners? > Experienced Subject Matter Experts - OCR and conversion experts - Experienced contract attorneys and paralegal teams can address your backlog - Create summaries of contract provisions - Populate database - Manage contract workflows and prepare documents - Supplement information risk analysis, global business and legal research 14

15 Why should we engage partners? > Project and Change Management - Change can be managed by experts with experience in contract management implementations - Trained on contract management software and clients internal systems - Projects are managed by a partner, not a burden on current internal teams - Managers are able to maximize time and value 15

16 Why should we engage a partner? > Software tools and support - Automation of contract creation and management - Workflows, alerts and reporting - Central repository and searchable database - Advanced, customizable features - Compatibility with existing internal systems - Technical support and maintenance 16

17 Challenges Your Business Faces Visibility Compliance & Risk Challenges Legal/Contracting groups are challenged to serve all stakeholders Non-Standardized Terms Nobody has the luxury of losing revenues by missing contractual commitments or renewals Contract Lifecycle Timing 17

18 Contract Management Solutions: Repository Search by category/ Supplier/Contract No. Search by Keyword Line item Search Authorized user access Create and manage users Create user views Multi Parameter Search User defined access Track utilization of contracts Track FOREX / Commodity Index trends and deviation Utilization Tracker icontract Repository Alert & Reminders Expiry/Renewal Alerts Utilization Alerts FOREX/Commodity Index Alerts Compliance Tracker Reports & analysis Spend to contract match Non contractual spend tracker Secured Access Multidimensional reports Adhoc & Precanned reports Share, print & export reports 18

19 Contract Management Solutions: Authoring Author contracts using MS Word MS Word to icontract import MS Word integrated Template Library Easy Template Retrieval Create new Templates Configurable step wise process Wizard Based Contract Authoring icontract AUTHORING Clause Library Pre-approved Clauses Set hierarchies Invite multiple stakeholder Collaborative Authoring Contract Negotiation Standard/customized negotiation workflow Review & add amendments 19

20 Challenge 1: Visibility Renewals Key Contract Terms Contract Ownership Contract Hierarchies Auto renewals a key issue Termination for convenience, payment terms, risk mitigation Who is the Sourcing manager? Who is the contract owner? SOWs, Prime and Sub Agreements, Amendments 20

21 Solution: Visibility Implement a central repository to store and manage your contract information Identify key terms which need to be tracked for key contracts Ensure all evergreen contracts are reviewed with business owners and identify opportunities for renegotiation Reports to provide trend analysis Auto renewal reports and contract expiration alerts to prepare for sourcing projects

22 Challenge 2: Compliance Purchase price compliance How to we ensure that we get the pricing we negotiated for? Control Maverick Spend How do we ensure that people buy from these contracts? Visibility of existing contracts How do we ensure that people are aware of existing contracts for products and services? 22

23 Solution: Compliance Match established contracts with actual spend transactions to identify non approved vendors. Increased visibility of contracts with integration with your ERP system PO should refer to a contract to get pricing Ensure that you track utilization of the contract. Match purchase information with contract to identify purchase price compliance as well as rebates.

24 Compliance Reporting 24

25 Contract Utilization and Performance 25

26 Contract Utilization and Performance 26

27 Challenge 3: Standardization Different categories use different templates Most of spend is services and we don t have standard templates We are global in nature so can t standardize our templates 5 different indemnification clauses across different templates Professional services a classic example Ensure multi-lingual is supported 27

28 Solution: Standardization Standardize your terms and clauses by working with different stakeholders. Implement a process which automatically guides sourcing managers to the right template based on a question based survey. Identify services which are bought repeatedly and define your own templates based on third party boilerplate. Track what terms are often negotiated and change those terms in the base templates. Define a clause hierarchy based on the different region requirements.

29 Standard Template & Clause Library 29

30 Quiz Question #2 Lost Time in Sales Cycle > Which of the following represents the amount of the sales cycle surrounding contracting and contract management? 1. Little or none 2. 2% 3. 12% 4. 18%+ 30

31 Quiz Question #2 Lost Time in Sales Cycle > Which of the following represents the amount of the sales cycle surrounding contracting and contract management? 1. Little or none 2. 2% 3. 12% 4. 18%+ 31

32 Challenge 4: Cycle Time Approvals take too long Redline and negotiation is a tedious process. I don t know the approval hierarchy Signatures and scanning executed documents takes too long 32

33 Solution: Cycle Time Automate the approval process though a CLM tool Pre defined approval hierarchy based on category, Spend etc. Use E Signature to automate the signature process. Implement Clause level approvals Don t send entire contract for review, define clause ownership and automate this process. Track the efficiency of contracting process and make adjustments.

34 Version Control 34

35 Cycle Monitoring 35

36 Quiz Question #3 Management Cost Savings > How much can I cut operating and processing costs associated with managing contracts? % % % % 36

37 Quiz Question #3 Management Cost Savings > How much can I cut operating and processing costs associated with managing contracts? % % % %* > * These savings increase as you utilize partners! 37

38 Top 10 Takeaways > 10. Your backlog is not insurmountable! > 9. The longer you wait, the worse it will get. > 8. Automation and streamlining are attainable with software. > 7. Avoid compromising your internal teams! > 6. Outsourcing project & change management has huge cost savings. > 5. Monitor productivity and custodial activity metrics. > 4. Never miss an important date with automatic alerts. 38

39 Top 10 Takeaways > 3. Not taking action will expose you to compliance & regulatory risks! > 2. Without a clear CM system your organization wastes time, money and effort. > 1. You are losing out on sales, incentives, and other inherent value Contract Management helps avoid loss and generates increased revenue and opportunity. 39

40 Contact Richard Waugh, Zycus VP of Corporate Development Kalisha M. Crawford, Esq., GreenPoint Legal Director of Legal Services David Kinnear, GreenPoint Legal Managing Director Business Development THANK YOU! 40