Although the topic seems to have disappeared from the public eye in recent months in the wake of the currently rampant pandemic, it is still of considerable importance for a large number of companies in this country: We are of course talking about the upcoming and possibly hard Brexit.
It is true that it has not yet been conclusively clarified under what signs the United Kingdom’s departure from the EU at the end of the year will take place – the negotiations on the modalities have not yet been concluded. But one thing is already becoming clear: a large number of contracts that companies in this country and in the rest of the EU continue to rely on will be affected by Brexit regardless of the outcome of the negotiations. According to a study by the contract management expert Icertis, around 10 percent of all contracts of Global 2000 companies that do business in the European Union are affected by Brexit.
Given that each of the world’s 2,000 largest companies has an average of tens of thousands of ongoing contracts, the results of the study suggest that thousands of active contracts in any company are likely to be affected – not least because of the myriad consequences of Britain’s exit from the customs union and from now on restricted freedom of movement.
The results allow only one conclusion: Comprehensive contract management by means of a corresponding platform has become almost inevitable for a large number of companies these days – not doing it would be associated with disproportionately high costs. This is by no means just about document management, but about integrating contract content into business processes, automatically giving instructions to those involved in the respective process in order to comply with the contractual and legal conditions or to adapt contract content and thus also business processes.
Accordingly, a contract management platform must be powerful enough to take into account all regulatory changes that affect the content of the contract. This is the only way to ensure that those responsible in the company have an overview of which contracts are affected by fundamental changes such as Brexit – even if only marginally – in order to be able to assess the consequences for the organization and react to them.
The companies that have already digitized their contracts are thus in a position to identify all those who will be affected by the final design of Brexit (which is still subject to many question marks at the time this article was written). In addition, these organizations will have the opportunity to implement alternative formulations of the contractual clauses in good time and to be able to make changes to their entire contract portfolio promptly.
At the same time, companies that have not yet introduced a company-wide contract management system are confronted with a cumbersome, manual process to find all contracts affected by Brexit – a time-consuming mammoth task that will not necessarily be crowned with success. After all, it is not only about changing texts, but also implementing these changes in the business process. In the case of contracts that are only managed via document management, this is an extremely complex challenge. Intelligent contract management, on the other hand, transfers the adjustments to the contract directly to the business process (s) concerned.
Some may now think that this information would have been helpful two years ago in order to be able to take appropriate steps in good time, and not just around a month before the end of the Brexit deadline. However, there will be many more “Brexits”. Of course, this means similar regulatory or political changes, which as a result lead to massive effects on business relationships and the contracts that regulate them. Since global business relationships are increasingly networked and trade is becoming increasingly global, many changes and disruptions inevitably have cross-border consequences.
A good example of this is the European General Data Protection Regulation (GDPR): It wasn’t that long ago that countless organizations were confronted with the question of how they could best meet the requirements of the GDPR without running the risk of non-compliance to be punished.
Many companies decided at the time that implementing a comprehensive digitization program for their contracts would be too time-consuming to simply comply with the GDPR. So they decided to wait or postpone the work to a later date, hoping that in the meantime they could achieve conformity in another way. However, a number of other companies used the GDPR as an opportunity to digitize their contracts. In order to be best prepared for the short term as well as for the future. The latter are now – shortly before the final Brexit – in the predestined position to meet this challenge with confidence.
Although not all regulatory innovations or political decisions have the same impact as the GDPR or the imminent Brexit, it will not be the last time that changed framework conditions have a significant impact on companies’ contracts. And even minor changes can be a major challenge in case of doubt. The list of such changes goes on and on. In 2018 alone, Thomson Reuters Regulatory Intelligence recorded more than 57,000 regulatory changes and updates from over 900 supervisory authorities worldwide – an average of 220 per day.
Although the final Brexit is just around the corner, companies and organizations should urgently think about how they want to map these massive regulatory changes in the contracts and, of course, in the business processes. The companies that have implemented a solution for intelligent contract management achieve clear competitive advantages over those who can change texts via document management, but have to laboriously adapt business processes to them bit by bit. In a first step, purchasing and the company’s legal departments in particular benefit from the introduction of an intelligent contract management system. However, since contracts – at least about the employment contract and data protection – affect every employee, the entire organization benefits very quickly from the new solution.
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