What is contract governance, and how can you make sure you're getting it right? Find out in this guide.
What is contract governance?
Contract governance describes a set of processes that businesses put in place to manage their contracts in an effective and compliant way. The purpose of contract governance is to mitigate risks, ensure performance, and maintain strong relationships with counterparties.
Without contract governance, businesses can find themselves faced with unmet obligations, contract value leakage, and legal implications. Yet, few businesses prioritize contract governance in 2024, leaving them at risk.
Fortunately, there are a few simple steps you can take to avoid falling into this trap. Let's explore how businesses like yours can improve their contract governance now.
How to improve your contract governance
1. Standardize your contract templates
One way to improve your contract governance is to assure greater consistency when creating contracts. This often involves standardizing your contract templates and making sure commercial teams only create contracts with terms drafted and pre-approved by legal.
Standardization eliminates the risks associated with unclear or unfavorable contract terms. It also means that stakeholders know what to expect when executing certain business contracts, making it easier to predict the resources and work required to perform it successfully.
2. Automate workflows where you can
Finding opportunities to automate contract-related tasks is another great way to improve your approach to contract governance.
Automating contract workflows can reduce manual input and minimize the possibility of costly mistakes. It can also empower legal teams to focus on higher-value contract governance tasks where their expertise is most valuable.
Automating certain workflows will also help to standardize the contract lifecycle management process. For example, automated contract approval workflows ensure contracts are reviewed by the relevant stakeholders, and at the right time.
Automated contract workflows remove the problems that occur when commercial teams have too much discretion over contract terms, while still providing the flexibility needed to account for different circumstances and contingencies. This is essential for effective (but realistic) contract governance.
3. Clearly define roles and responsibilities
Businesses often fail to assign roles and responsibilities to the relevant stakeholders. This can result in a few problems.
- Double work. When stakeholders aren’t clear on their responsibilities, they can find themselves doubling up on tasks, costing them valuable time and resources.
- Missed responsibilities. When there’s no clarity on who owns what, you run the risk of missing tasks altogether. This can result in costly delays or decisions that hurt the business’ bottom line.
- Communication breakdown. If there’s no visibility into what others in the team are working on, it’s difficult to know who to reach out to if you’re faced with a problem. This can result in decisions being made without the necessary oversight.
All of these things contribute to increased contract risk, so it’s important to be clear and precise when allocating certain roles and responsibilities. It should also be obvious when things should be escalated, and who they should be escalated to.
4. Provide training and codify processes
You should make the wider business aware of contract governance processes by providing comprehensive training and capturing them in a playbook they can refer back to. This is a great way to make sure the measures you put in place are adopted throughout the business.
However, the best way to codify contract processes is to automate them using contract lifecycle management software.
Automating workflows in a CLM solution like Juro enables commercial teams to self-serve on contracts with confidence. It means fewer queries for legal to answer, and fewer blockers. As a result, commercial teams can agree contracts 10x faster than with traditional tools.
To find out more about how Juro’s intelligent contract automation software can improve contract governance for your business, hit the button below.