Clause for concern: Mitigating the costly risk of invalid agreements in your organisation

By Rashi Elhance, Regional Vice President of Sales, Docusign

How healthy are your contracts and agreements? Are there any points of weakness in the contracting journey that could expose your organisation to risk? 

As many organisations across Asia are now realising, agreement risk is a very real and pressing concern. With business leaders keen to find ways to effectively mitigate this risk, let’s take a look at the extent of the problem and how to solve it. 

What is agreement risk?

In a nutshell, agreement risk refers to the exposure an organisation faces when contracts and approvals are not properly created, managed, tracked, or enforced. 

Risk can surface in the earliest days of a contract. For example, ambiguous or poorly defined contract terms can lead to misinterpretation or disputes that result in costly legal battles. Likewise, if essential clauses are missing, such as dispute resolution mechanisms, termination clauses, force majeure, intellectual property rights, or indemnity clauses, the contract could be deemed invalid. 

Organisations in heavily regulated industries like financial services and healthcare also face the risk of non-compliance if their contracts do not comply with applicable laws and regulations (e.g., data privacy laws like GDPR/CCPA, industry-specific standards, or environmental regulations). Yet no business wants to face a breach of these compliance frameworks.

The costs can quickly add up

The business impact of agreement risk can be huge, and it’s more common than many people think. In a joint study with Deloitte, we found that poor agreement management practices and systems cost organisations nearly US$2 trillion in annual global economic value. A similar study found that ineffective contract management costs companies an average of 9.2% of their annual revenue, with large investment projects experiencing losses as high as 15%. 

These losses are typically felt in two key areas: value loss and revenue leakage. The first, value loss, occurs when organisations miss out on revenue opportunities because deals are delayed; or when time is wasted chasing up incomplete contracts. The second, revenue leakage, occurs due to things like missed billing and under-enforced penalties, pricing inconsistencies, or missed renewal opportunities.

And, for organisations in heavily regulated industries, there’s also the risk of fines, penalties, forced contract termination, and legal action if their contracts don’t comply with regulatory requirements. The financial services sector is particularly susceptible to agreement risk due to its complex regulatory environment, high transaction volumes, and the sensitive nature of its operations. So much so that the financial repercussions of non-compliance are approximately 2.71 times greater than the costs of maintaining robust compliance programs. 

Organisations are proactively reducing their risk 

One good thing coming out of all these costs and concerns is the fact that organisations are now a lot more aware of agreement risk, and are taking proactive steps to mitigate it. 

For starters, we’re seeing a big shift from manual, paper-based processes to digital agreement management systems. Digital platforms centralise contract storage, improve visibility, automate workflows, and provide audit trails — all of which are essential ingredients on the path towards risk-free contracting. We’re also seeing far greater adoption of AI across the agreement management lifecycle, with intelligent tools helping to automate routine tasks, extract key data (e.g., billing terms, legal clauses, renewal dates), detect risks, and even assist in contract drafting and negotiation.

We’re also seeing leading companies approach agreement risk as an organisation-wide problem. These companies realise that contracts aren’t just a “legal” problem. Rather, the information in contracts flows across departments and into the systems that departmental teams use. As such, contracts are a problem that needs to be solved from the top down.

This is where a solution like Docusign Intelligent Agreement Management (IAM) comes in. Built to address agreement risks, Docusign IAM solves for the times when sales teams blame legal teams for missed deals. It solves for when customer onboarding takes too long or is too complex, leading to abandonment. It solves for HR, which was losing top talent due to lengthy hiring processes. And so on. 

What makes Docusign IAM really special? There are three unique solutions within the platform, each of which plays a key role in helping organisations mitigate risk:

1. Docusign Navigator. This is a central repository for all contracts within an organisation, making it quick and easy for stakeholders to access an agreement to help guide business decision-making. For example, someone might want to check all contract renewals coming up to make sure that they meet the new regulatory standards your organisation must comply with. In Navigator, this is all secure and simple. 

2. Docusign Maestro. This tool helps organisations create contracting workflows with no code. Apart from the fact that it significantly accelerates the contract creation process, it also helps mitigate the risk of value loss in the contract lifecycle. With Maestro, for example, it’s possible to build web forms with field validation rules, which helps ensure that contracts don’t come back not in good order (NIGO). It’s also possible to build ID verification into workflows, which again can help avoid excessive manual or back-office follow-up on contracts. 

3. Docusign App Center. Docusign works closely with other vendors like Salesforce, Microsoft, Google, SAP, ServiceNow, Workday and more, which makes it easy for users to integrate Docusign into the tools their teams use every day. 

And, across it all, Docusign Iris delivers AI-powered insights and features across the agreement lifecycle — helping users create agreements faster, negotiate and sign contracts with greater confidence, and use agreement data for maximum business impact. 

Are you ready to improve the health of your agreements and contracts? Explore Docusign IAM today or get in touch to learn more about how it could help transform contract management in your business.