Our recent webinar with IACCM, Contract Management – Beyond the Expected, raised a lot of interesting and varied points about the need for contract lifecycle management, and the potential complexity involved. Especially around data visibility – or lack of it, what in technical-speak is called “data disaggregation.” Which is a fancy-pants way of saying your data is a hot mess.
Data disaggregation can be the result of a number of things, including multiple system implementations over time, geographies, and rapid and / or repeated merger and acquisition activity. M&A is a big culprit, especially in industries that run on data, like financial services for instance. Which often are also industries that rely very heavily on contracts. This creates what Sean referred to as “unknown-unknowns” – the likelihood that what you can’t see is dangerous 3rd-party risk.
Data, data everywhere. But where?
Over the years I have done a number of stints in financial services marketing at commercial banks, investment banks, asset managers and others. While different places had varying degrees of data integration, it was generally never 100%. A while back, I got an offer for a contract position at a major US bank to, in their words, “clean up customer communications.”
This bank – like many – had gone on a buying spree for a decade or so, snapping up small and regional banks and financial firms in various parts of the country. This resulted in a dramatic rise in disconnected systems across geographies, at the same time increasing the number of disparate products and services in the bank’s portfolio. By the time I got there, the customer communications team had more database people on staff than anything else.
Why? Because they had “inherited” close to 6,000 separate customer letters across all those institutions. All different systems, all different locations. It was obvious they had no idea of their unknown-unknowns – and these were simple customer letters.
I don’t know if this particular financial institution was “systemically important” or not, but with a huge portfolio of mortgages, personal and auto loans, banking services and a major credit card business, what were the real business and third-party risks lurking in the rest of all that data disaggregation? I didn’t stick around to find out, and neither did my money, since I was also a customer of the bank – at that time.
Contract management rule one: you can‘t manage what you can’t see.
If contracts are the lifeblood of business, then data is what gives those contracts their value. This is true from a purely commercial standpoint – e.g., knowing the obligations, expectations, parameters of all parties in a contract. It’s also critical from a risk perspective: to paraphrase this blog about Carillion, all the data points have to come together in one place in order to minimise the risks to the organization. From a regulatory viewpoint, have visibility and control over enterprise data is usually beyond a simple business imperative, but a legal mandate.
The recent Forrester research report, Predictions 2018: A year of reckoning, showed that 80% of organizations admitted they won’t be GDPR compliant by May 25 – the deadline. What’s more (and more troubling), 50% of organizations said they weren’t going to bother. They would rather take the risk of significant financial and reputational damage (fines for non-compliance are set at €20 million or 4% of annual global turnover) than confront the task, admittedly Herculean, of getting enterprise data under control.
If a company doesn’t have its data in hand, how good are the contracts it’s creating?
As Sean, Mike Behne, VP of Professional Services at Determine, and Tim Cummins, CEO of IACCM, all agreed during the webinar, implementing a contract lifecycle management solution has to be preceded by a top-down commitment to preparing for it first. As Mike mentioned, Determine can do a CLM implementation in eight-to-twelve weeks, depending on the company and its complexity. But that means having all the groundwork done, all the organizational sponsors in agreement, all the budget sources in line. But just as importantly, having all enterprise data present and accounted for – even if the contents are “unknown-unknowns” is mandatory.
Otherwise, you may end up better managing your contracts, without better managing risk.
The webinar with IACCM, Contract Management – Beyond the Expected, is on-demand. You’ll also find a host of other CLM, supplier and other research, whitepapers and webinars in our Resource Library. If you’re ready to see first-hand how to manage contracts on the Determine Cloud Platform, schedule a personalized demonstration.