Always expect the unexpected
You never know what’s going to happen next. Life is full of unpredictable surprises, some pleasant, some not so. We can only control what we can control – everything else is out of our hands.
For example, we can ensure we always drive safely, but we are but one of thousands of cars on the road at any given time. We do not know who will lose control or unexpectedly swerve into our lane.
A business is no different. You are no doubt diligent, compliant and respectable. You ensure that the company and its employees act legally and appropriately.
However, your business is not an island. It must interact with customers, suppliers and a range of third parties. Who knows what they are planning, who they employ, and what risks they pose? This reliance on the delivery of goods and services that are out of your control is what makes procurement and contracting so risky.
There are also events that are no one’s fault. Forces of nature, disasters, Icelandic volcanoes, earthquakes and, as we have seen recently, global pandemics. Such events are out of everyone’s control. They are no one’s fault, but they are suddenly everyone’s problem.
Controlling events that cannot be anticipated
Does this mean that businesses and GCs should just accept the risks of an unpredictable world? Should legal professionals shrug philosophically at the contingent, unexpected nature of our world? After all, if we can’t change what others will do, if there is some predeterminism in place, and if Mother Nature will do as she pleases, surely nothing can be done to mitigate risk?
Not at all.
As already stated, your business is interwoven with many other parties. These relationships are reflected in your portfolio of contracts: what goods or services are being exchanged, for what price, when payments are due and so forth.
Each time an unexpected event occurs, those contracts need to be explored to identify liabilities and obligations. For example, consider the end of Libor, GDPR, and the global pandemic. Businesses need to know immediately how their commercial relationships are impacted. GCs are asked: ‘“How does this affect us? What do we need to know about the impact on our business and our commercial relationships? What are our obligations and potential sanctions should we be non-compliant?”
The grind of manual contract checks
Traditionally this is a slow, manual (and painful) affair. A senior member – or even members – of the legal team will need to:
Locate all the company’s contracts (and let us not make light of this first stage; contracts are notoriously poorly managed post-signature, with businesses often not knowing where their contracts are stored – either analogue paper format or digitally – never mind what is held within them)
Review each contract manually to see if the contract is in any way impacted by the specific event
Return the contract and move on to the next one
This is in and of itself a grind. But the bigger issue is that this process needs to be conducted for each new crisis. Each time, contracts are reviewed only for a specific scenario. As soon as that one topic is assessed, the lawyer moves on. Months, weeks or even only days later, something new occurs that requires a fresh round of contractual reviews.
Repetition is unavoidable, making the process slow, expensive, and inefficient.
This also subjects the business to additional undue risk. The longer it takes the enterprise to understand its obligations or the impact of their contractual terms, the greater the threat of non-compliance.
Digitise once, review at will
The answer lies in legal tech, specifically contract review technology. By digitising each contract at the point of first review, a digital data asset is created. It is structured and formatted to make data exploration fast and simple.
No more contract hunting; all contracts are stored in one central place
Searching for specific terms and obligations is fast and easy
The whole endeavour is cheaper, and removes undue risk
It is scalable, no matter how many contracts need to be explored
In our recent webinar, Rob Dinning, EMEIA Legal Function Consulting Leader at Ernst & Young, expressed this point beautifully.
“GDPR, end of Libor, and COVID-19 has sent people running to their contract stack, opening the cupboard door and looking through those same contracts for a different reason. To diagnose that as not a once-in-a-lifetime event, but a perennial state of needing access to data on a very agile and responsive basis, let’s not solve it by getting an army of paralegals to read it for that clause, and then six months later ask them to do it again. Use that as the impetus to say ‘what we need is a digitisation program, so we make our contractual assets digital assets. It can help us respond to regulatory or other external events, and it can also enable some proactive analysis to help us stay ahead of risks or maximise opportunities’.”
Seek the silver lining in the cloud
You can never predict the next crisis, but you can ensure you are set up to manage it effectively. To return to our car analogy, you cannot control the actions of other drivers, but you can ensure that your own vehicle is roadworthy, you are wearing a seatbelt, and the airbag is functioning correctly. Should anything happen out of your control, you are prepared.
We know that GCs struggle to get investment for legal tech. And this is precisely why you should not let a good crisis go to waste.
There is always a new emergency around the corner. By showing the business how difficult it is to manually assess the impact of each new crisis on all contracts and obligations, you can make a compelling case for legal tech.
When the next crisis hits, your legal team is prepared. Your contracts, now digitised and structured ready for interrogation, are available on demand.
By investing in technology that allows you to digitise at the point of first review you give your legal team the power to quickly understand all obligations and compliance requirements, putting you in a position of strength while your competitors are floundering.
They say when life gives you lemons, make lemonade. In legal tech terms, that means using the current crisis to ensure you get executive investment in the right technology to protect yourself from future crises.