Top Trends for Contract Management in 2020
Contract management is the process of managing contract creation, execution, and analysis. As organizations look to reduce risk and improve operational efficiency, contract management has shifted from a back-office conversation to a way of gaining competitive advantage. Contract management solutions offer a compelling opportunity to automate key processes across the contract lifecycle, capitalizing on innovations in contract generation, collaboration, e-signature, workflow, and analytics.
Here are the most promising contract management trends to watch in 2020.
Smart contract code automates performance of key aspects of agreements based on data inputs—whether from internal or external systems. A myriad of use cases range from automatically applying volume discounts for purchases from key suppliers, to routinely confirming credentials or eligibility for employees and contractors, to calculating and issuing payments based on conditional factors like shipping requirements or SLA fulfillment. What’s exciting as we move into 2020 is the growing recognition that smart contract code doesn’t require blockchain and can be embedded in otherwise traditional legal contracts. The rise of cloud-based “smart legal contracts” means that enterprises can start reaping the benefits of contract automation today.
Welcome to the Decade of Data Privacy. CCPA became active on New Year’s Day, GDPR is well into its second year, and a motley patchwork of US state privacy laws is emerging. Faced with inconsistent standards and a heightened risk of both state attorney general enforcement and class actions for data privacy breaches, organizations are increasingly realizing compliance isn’t a one-and-done effort, but an ongoing commitment. It starts with knowing what’s in your existing agreements with any entity with whom you share data. From there it extends into a plethora of interactions with customers and employees—delivering adequate notifications, collecting provable consent, and fulfilling subject access requests in a way that is not only compliant but also builds customer trust. As most agreement systems are ill-equipped to meet these challenges, 2020 will see a heavy focus on leveraging contract AI, electronic signature, and digital contract lifecycle management (CLM) to address data privacy compliance.
Whether to address data privacy, uncover capital opportunities, inform negotiations, or prepare for changing trade relationships (Brexit is real, folks!), organizations undeniably need to know what’s in their agreements. The twenties will see fast-waning tolerance for legal and procurement teams that can’t deliver transparency into their vast volumes of agreements. Contract AI that intelligently converts text into clauses and concepts that can be searched, filtered, and compared will eventually become de rigueur. But the most promising change is the rethinking of contracts as modular, digital entities right from inception, informed by all that’s gone before. This represents a leveraging of the lessons surfaced by contract AI to make all of an organization’s agreements—and agreement processes—smarter.
According to a 2019-published report by CDP, 215 of the world’s largest global companies are recognizing climate change as a serious threat to business—with nearly $1 trillion at risk and 73% of responding companies confirming they have board-level oversight of climate-related risks. As supply chain accounts for some 50-70% of corporate carbon emissions, climate-aware contracting with suppliers is a growing trend. The first step for many companies is, once again, to know what’s in their agreements—to identify contracts and clauses dealing with (or failing to address) CO2 and other climate-impacting emissions. Digital contract technologies can also streamline the process of updating, re-negotiating, and executing supplier agreements without resorting to paper, thus reducing the climate impact of the agreement process itself. Among the many goals of contract management, helping to decarbonize existing relationships may be the most critical and impactful.
We all verify our identity every day—often multiple times—whether it’s entering a PIN into a point-of-sale machine or using fingerprint recognition to unlock a smartphone. But for important business contracts, such as opening a bank account or switching your wireless plan, industry regulations may require more thorough verification, which in the past has meant in-person ID verification. Digital driver’s license pilots are already underway in several U.S. states and electronic ID (eID) schemes are gaining momentum in Australia, UK, Netherlands and the Nordics and we expect to see more national eID programs evolve in 2020. Contract technologies that can leverage these emerging standards to confirm proof of identity online will simplify the experience for businesses and consumers alike.
Remote online notarization
Notarization is one of the most common processes that requires identity verification. In the past, this meant the signer had to appear in person before a Notary Public. Remote Online Notarization (RON) eliminates perhaps the largest frustration consumers have with notarization, having to physically be in the same location as the Notary. 22 states have now legalized RON (up from only 3 in 2018) and more states are poised to approve RON in 2020. With RON, you can now get a document notarized from virtually anywhere whenever it is most convenient for the consumer, with the Notary validating the identity of a digital signer via online audiovisual technology and electronically stamping the document to complete the process. Broad acceptance of RON in the coming years will improve the customer experience and increase digital adoption for numerous contracting use cases.
Customer and employee experience
Experiences will continue to be the primary driver of satisfaction for both customers and employees. We know customers place as high a value on the interactions they have with a company throughout the buying process as they do with the product or service they are buying. In 2020, we expect to see even more emphasis on personalizing experiences and anticipating customer needs in advance. In the contract world, this means making it easy to complete any necessary paperwork on a mobile device; PDFs that need to be downloaded, printed, filled in, signed and scanned just won’t cut it anymore. In the future of work, employees demand similar digital experiences, both for forms they have to complete for HR as well as the processes they manage as a part of their job. Freeing employees from manual, paper processes lets them focus their time on more meaningful and strategic aspects of their roles.
As companies mature, the number of stakeholders involved and the complexity of the contract process dramatically increases. Digital leaders need to stay on top of these trends in contract management to do business faster with less risk, lower costs and better experiences for customers and employees. Learn more about the state of contract management in our recent research.