Contract Management: Advanced Issues
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Management Contract Berkman | Solutions 10260 SW Greenburg Road, 4th floor Portland OR 97223 United States 1 (855) 517-2193 North America +1 (503) 517-4293 Worldwide www.BerkmanSolutions.com [email protected] Advanced issues
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Contract management is about risk management. This presentation addresses six important topics in commercial contract management: regulatory compliance, performance obligations, representations and warranties, insurance tracking, counterparty risk, and contract portfolio. REGULATORY COMPLIANCE Contracts operate within a legal context of federal, state, and local law. Lawyers and contract managers responsible for managing contracts need to perform routine compliance reviews by contract. PERFORMANCE OBLIGATIONS The majority of contract provisions discuss behavior of both parties. Actions are required, permitted, or prohibited. Under certain conditions, the performance obligation can change. This metadata framework transforms text into data to improve contract management. REPRESENTATIONS AND WARRANTIES Parties often make promises about the condition of their business or the subject of the contract. Reps and warranties can be as mundane as the promise that the organization is organized in a specific jurisdiction. The promise might be essential to the detail, such as ownership of intellectual property and the license is free from any third party claims. INSURANCE TRACKING Contracts allocate risk between the parties. To address unknown contingencies, contracts often require a party to carry insurance and maybe even name the other party as an "additional insured." Insurance polices, however, usually expire during the term of the contract. If you do not track the expiration of the other party's insurance policy then you may not get the benefit of the policy when its needed. COUNTERPARTY RISK Contracts connect one organization to another. Organizations consist of people, and as such they change overtime for good and ill. Contract managers need to keep careful tabs on counterparties, independently of contracts. CONTRACT PORTFOLIO A single large customer or reliance on one supplier of a key product or process are well understood risks, but many organizations under appreciate contract portfolio risks. Portfolio risk is unique to each organization. Typical sources of contract portfolio risk include: - customers concentrated in a specific geographic location where economic conditions can affect the group; - customers concentrated in a particular sector where regulatory changes or economic event can cause reversals in a significant segment of the customer base; - contracts containing the same material provision ruled unenforceable by a court; - several purchasing or licensing contracts that contain pricing escalators not tied to organization performance; or - contracts that contain provisions that limit strategic alternatives like new capital structures, acquisitions or restrictions on an organization's activity. These challenges to your organization are clear only through the lens of contract portfolio analysis.
Transcript of Contract Management: Advanced Issues
ManagementContract
Berkman | Solutions !10260 SW Greenburg Road, 4th floor Portland OR 97223 United States ! 1 (855) 517-2193 North America +1 (503) 517-4293 Worldwide www.BerkmanSolutions.com [email protected]
Advanced issues
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How would you answer these questions?
Berkman | Solutions !10260 SW Greenburg Road, 4th floor Portland OR 97223 United States ! 1 (855) 517-2193 North America +1 (503) 517-4293 Worldwide www.BerkmanSolutions.com [email protected]
Regulatory compliance
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Do we know what federal, state, and local laws conflict with or modify our contracts?
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Yes, we have listed important regulatory requirements.
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Moreover, we conduct routine compliance reviews of contracts and store results with the contract record.
Performance obligations
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Can we easily find the detailed, specific provisions of each contract?
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Yes, we have identified each important provision in our contracts.
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Moreover, we categorize each action as required, permitted, or prohibited for us and the counterparty.
Reps and warranties
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Do we know all the promises we and our partners have made about our business?
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Yes, we track each representation and warranty separately.
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Moreover, we deliver and monitor reps and warranties routinely so we can test for compliance.
Insurance tracking
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Do we actually track other parties’ insurance coverage provided for in our contracts?
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Yes, their insurance ends before contract expiration, but we track each certificate due date.
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Moreover, we receive automated alerts about insurance due dates and provide coverage reports.
Counterparty risk
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Do we we know how many contracts we have with each company?
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Yes, all contracts are linked to the correct counterparty record so we can report by counterparty.
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Moreover, we perform routine reviews of strategic partners and keep the results in one place.
Contract portfolio
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Senior management can’t review every contract. Do we have a one page view of our entire contract portfolio?
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Yes, we provide a one page contract portfolio analysis.
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Moreover, we can provide that report automatically.
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Advanced issuesBerkman | Solutions !10260 SW Greenburg Road, 4th floor Portland OR 97223 United States ! 1 (855) 517-2193 North America +1 (503) 517-4293 Worldwide www.BerkmanSolutions.com [email protected]
