Your company might be liable to significant financial loss and legal problems on account of insufficient attention to contract management. Contracts are frequently involved when your organization/organization purchases or sells goods and services, or enters into relationships with companies or individuals for a variety of purposes. Most organizations can take pleasure in implementing better, consistent organization-wide practices and procedures for drafting, negotiating, signing, fulfilling and storing contracts. If you’re not confident that your company has a well designed and functioning contract management process, you’re able to assess the effectiveness of your contract management processes and practices and identify tips on how to reduce contract risks by conducting a Contract Risk Assessment Survey.

Contract Risk Surveys gather details about practices and procedures for drafting, negotiating, signing, fulfilling and storing contracts across organizations. The target is to take advantage of the ideas gathered by the survey to develop better consistency around the organization to maximise the efficiency of contracting practices and processes and minimize risks related to any inadequate contracting controls.

The questions in Contract Risk Assessment Surveys are designed to assemble information for analyzing how organizations manage contracts. The insight and knowledge managers and other employees inquisitive about the contract process provide is vital for filling in significant knowledge gaps and for calibrating contract practices across business areas as a way to develop successful and scalable company-wide practices.

Identifying Contract Risks

Contract Risk Surveys identify enterprise-wide and organizational unit specific contract-related risks. Many of the contract risks identified by the surveys include:

1. Risk to the organization’s assets, intellectual property, reputation, etc. as a result of poorly written/executed contracts

2. Risk of unauthorized employees signing contracts committing the organization financially and legally

3. Risk of contract non-compliance by suppliers and other entities

4. Risk of not monitoring/following up on contract terms and requirements

5. Risk of establishing and signing contracts which are unfavorable on your organization

6. Risk of building and/or signing contracts without advice/review by legal counsel

7. Risk of misplacing original signed contracts

8. Risk of getting inefficient and inconsistent contract practices and procedures around the organization

9. Risk of not keeping contracts and contract terms confidential

Issues included in Contract Risk Assessment Surveys

Following are several of over 25 issues that we include in Contract Risk Surveys:

1. Identification of current contract practices

2. Awareness of contract practices

3. Varieties of contracts by organizational unit

4. Awareness of/compliance with contract signing authority

5. Typical value of individual contracts by business units

6. Annual value of contracts by business units

7. Use of third party contracts/contract terms vs. in-house contracts

8. Use of contract templates

9. In-house, external or no legal support for drafting contracts

10. In-house, external or no legal review of contracts

11. Identifying concerns about contracts

12. Practices for storing and preserving paper and electronic copies of contracts

Benefits of Contract Surveys

Contract Risk Assessment Surveys provide several benefits that mitigate risks and increase performance across organizations:

1. Improve contract tracking and contract compliance leading to reduced contract creation and contract management costs

2. Ensure suppliers and other outside parties are complying along with your organization’s contracts

3. Provide legal staff with information for boosting their support of the contract process

4. Avoid costly contract related litigation

5. Determine how well contract practices and processes has been communicated and are being followed around the organization

6. Use the contract risk survey findings for contract risk mitigation and to design and implement a consistent, enhanced contract management process and contract practices

7. Reduce the chance of unauthorized creation and signing of contracts

8. Provide managers with useful details about their business unit’s contracts and the way well they’re creating and managing contracts

9. Be sure paper and electronic contracts are stored securely

Concluding Thoughts

If your organization/organization doesn’t have a consistent process and practices in place for managing all your contracts, or if any of the contract management issues mentioned listed here describe possible shortfalls on your contract management practices, conducting a value-effective Contract Risk Assessment Survey within your company is a powerful technique to identify contract related risks. This can be a key first step in managing contracts more effectively and reducing contract risks.

Contract Risk Assessment Surveys
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Howard Deutsch is CEO of Quantisoft, a whole service survey company, conducting quite a lot of employee and customer surveys. Quantisoft conducted a comprehensive Contract Risk Assessment Survey for a number one medical equipment company, enabling them to spot and strengthen many shortfalls and inconsistencies of their contract management process and practices. Contact Howard at (609) 409-9945 or hdeutsch@quantisoft.com.

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