Let’s face it – a very difficult part of vendor risk management, particularly in mid-sized organizations, is usually the vendor contract management process. Why exactly is that? Well, unless you have an extremely efficient, well-organized and fully centralized contract management area, you’ll never have visibility into all of the contracts. In fact, I remember having to go through file cabinets, re-order items from offsite storage and eventually throw my hands up in dismay as I realized it was an impossible task to find all of the legacy contracts.
The 7 Ways to Drive Vendor Contract Management Efficiency
Let’s say you are a fortunate soul who has the ability to create a vendor contract process from scratch or perhaps just on a “go forward” basis. Let’s think about what it might look like:
- Set firm contract standards on who has the ability to propose, negotiate and execute contracts. Also consider who has the ability to grant expectations.
- Hire a contracts administrator professional who’s been through the battles and understands how to herd cats.
- Document clear standards on key provisions that must be included such as termination rights, each party’s responsibilities, a security and breach notification policy, service level reporting, rights to audit, post termination use of data and rights to market (or not).
- Ensure you have extensive tracking on key dates. Though generally the most important, you shouldn’t have tracking on just expiration or renewal dates. Also track dates when certain items are due, whether it’s notification of non-renewal, frequency of reporting or other key notification dates.
- Educate the business units and ensure they fully understand what they need to do and when you should be notified of either new contracts or renewal of a contract.
- Have a central and easy to search repository for ALL contracts and create clear and manageable reporting.
- Count on your board and senior management to help drive each of these steps. Keep them informed.
This is the goal! My congratulations if you’re able to achieve all of this! You will have mastered a task that very few manage to do well. Generally, the best we can do is set into motion the best possible process for managing; through our key relationship managers, the riskiest contracts and/or those we can gather and those we can manage on a going forward basis.
Contract management isn’t easy – it requires a commitment, not only by the parties involved, but by your entire company to make sure that agreements are entered into only in a very prescribed, controlled, centrally managed and uniformly enforced manner.
Your board and your senior management team must rigidly adhere to these standards in the best interests of your company, your examiners and your customers. Download our eBook for a guide to help you through the process.