How contract management plays a critical role in regulatory compliance.
Businesses need to be more responsive to regulatory changes; an agile CLM approach can help.
You’ve heard of HIPAA, Dodd-Frank, GDPR and Sarbanes-Oxley, but what about HITECH, Stark Law, CECL, IFRS 17, TIR57? There is no shortage of acronyms in the regulatory world, and no shortage of regulations whether you’re in financial services, healthcare / life sciences, pharmaceuticals or many other industries. One of the biggest issues with regulatory compliance is that the rules are always changing — and the changes seem to be accelerating. Which means your contract management needs to be even more agile and responsive.
Regulations come and go with each passing administration (this is true globally), but the need for contract management never wanes. The continuous stream of research, surveys and whitepapers from the likes of Spend Matters, Gartner, McKinsey, Deloitte and other top analysts bears out that fact. For organizations in highly-regulated industries, having a contract management solution that allows them to stay on top of dynamic regulatory compliance and other issues is mandatory.
The business reality of agile CLM.
While regulatory compliance is foremost among business needs, a responsive, flexible and agile contract management solution also increases process efficiency across the entire contract lifecycle. Which is an interesting business case for teams trying to sell the idea of a CLM investment within their organizations; a tool with the capabilities to mitigate risk and the possibility of losses (legal, GC) can also speed business opportunities, reduce sales cycles and save money (procurement, sales, CFO).
Whatever form an organization’s compliance program takes, it’s essentially a requirement these days to have one. Even the retail industry has to deal with the increase in supply chain risks from labor practices, modern slavery, environmental concerns and more. In companies with a Chief Compliance Officer (financial and healthcare, especially) contract management can play a central role in keeping tabs on compliance efforts – monitoring third-party certifications and validations, milestone dates, financial components, etc.
Contract management is compliance management.
Contract compliance is about visibility. You need to see where all the assets, obligations and provisions are and easily assess if all counterparties are adhering to contract terms and regulatory requirements. For many organizations, that visibility equates with “repository,” but that’s only a portion of the story. The recent go-live of the GDPR (Global Data Protection Regulation) is a good case in point. Even though this far-reaching regulation (many say overreaching) is EU based, it required organizations around the globe to re-examine their own data practices and those of the third parties they deal with. Any wonder why the internal efforts were led by the legal department?
A lot of organizations were late in realizing the impact of GDPR, and so there was a mad scramble to ensure compliance before the May 25 deadline. Another ongoing example of contract regulatory compliance re-evaluation is Brexit. It is causing an unprecedented amount regulatory and legal upheaval that is impacting contracts like few events ever have, and it doesn’t matter what industry. Even if your organization isn’t directly affected, the case for having an effective, efficient agile CLM solution to deal with the changes and mitigate the risks is clear. Those businesses that were ahead of the curve still are, everyone else is playing catch up.
[inlinetweet prefix=”” tweeter=”” suffix=”#RegulatoryCompliance”]Considering the ever-changing nature of the regulatory environment, and the shifting need for contract compliance within that environment, contract management can no longer be simply word docs and spreadsheets[/inlinetweet], or limited homegrown or point solutions. There has to be a single source of verified data across the enterprise that seamlessly feeds into a contract lifecycle management solution – and is ideally integrated on a cloud platform with supplier management, analytics and other areas. This agile CLM approach is the only way to demonstrate adequate regulatory compliance and reporting. And more importantly, stay ahead of the changes.