Legal Compliance Defined
Legal compliance is the process by which a business abides by the intricate laws, policies, and procedures that control business practices in a certain jurisdiction.
Knowing and comprehending the laws that apply to the organization is necessary for compliance, which also entails proving that the company and its entities are compliant at all times.
A thorough compliance procedure may involve maintaining check records, establishing rules and procedures in place to comply with the law and reserving proof that the appropriate parties are accepting responsibility for compliance.
The Changing Regulatory Environment
In the current corporate world, contracts have various stakeholders across every organization in mind. To increase financial and operational performance, this calls for an efficient approach to contract lifecycle management (CLM) procedures.
Those in the contract and supplier performance management fields have always been aware of the prospects in the end-to-end CLM arena. The pandemic's effects highlighted the value of contracts and supplier relationships as well as the supply chain.
The traditional return on investment (ROI) and benefits are, however, currently experiencing an emerging trend where they are being given more and more momentum by the quick and evolving changes in regulatory and compliance regimes, including data privacy, unfair contract terms, modern slavery, AML, and ESG (to name a few), as well as the associated financial, commercial, and reputational risks that these changes convey.
Contract Compliance Challenges
When attempting to comply with complex rules, organizations must overcome formidable challenges. Noncompliance could have severe consequences, including fines, harm to one's reputation, and missed business opportunities. We’ve previously deep-dived into the importance of staying on top of all obligations and compliance in this article. In light of the ever-changing compliance landscape, here are some measures you can take to resolve possible challenges that may come up.
Identifying and Understanding Relevant Laws
Due to the evolution of regulations, businesses need to be aware of and knowledgeable about the relevant laws that affect their contracts. They should constantly check for updates and revisions to verify compliance.
Managing Compliance Across Different Jurisdictions
Businesses that conduct business in multiple jurisdictions must be familiar with the varied regulatory frameworks. Applying regionally specialized compliance strategies and being aware of local legislation are required for this.
Compliance with Legal Requirements
Contracts must follow all statutory requirements, including any necessary language and terms. There can also be requirements as to form, which may or may not have an effect on the validity of agreements. Organizations must review and update their contracts to ensure compliance with these requirements as well.
Compliance with Effective Contract Management Strategies
There is a range of benefits that companies can accrue just by implementing a contract management software to improve their business operations. To directly address the struggles in the realm of compliance, here are more specific measures to adopt which can be made more convenient by a contract management software.
Conduct Contract Reviews
All contracts, both new and old, should be thoroughly reviewed to search for any potential compliance issues. Compare the wording, clauses, and terms of the contract with the applicable laws and regulations. To guarantee compliance, seek legal counsel as necessary. An effective contract management platform would provide a library of pre-made templates that already reflect regulatory mandates in your company’s area of jurisdiction, and should also provide a mechanism for making in-house templates that can be made available across departments for future use.
Perform Risk Assessment
An ongoing proactive risk assessment should be performed to identify any potential compliance deficiencies. Companies must create and implement mitigation strategies to actively close these gaps, which would entail continuous supervision, frequent audits, and a distinct division of labor for compliance.
A contract management software can help in this regard, starting with streamlining of templates that contain pre-approved terms and standardized language stored in cloud-based clause and template libraries. With automation, you may speed up those procedures while ensuring that your own business standards are followed. You can prevent missing deadlines and obligations by using automated alerts and notifications. Additionally, you can make use of all the data in your contracts to generate in-the-moment reports and analytics that may be utilized to give the business useful information about potential hazards in your contracts. Your company will sign fewer high-risk contracts as a result, lowering the risk level of your whole portfolio.
Centralize Contract Storage
Establish a central repository for contracts that is easy to manage and access. This is to ensure that the most recent contract information, including any compliance-related documents, is available to all relevant parties.
With a contract management software, you can speed up the approval process and guarantee that contracts are examined and authorized on time by using a digital contract repository. Your contracts are protected by enhanced security measures and user-specific permissions, while cloud-based storage eliminates the need for physical filing cabinets and facilitates effective document management, improving teamwork and overall productivity with this increased accessibility.
Streamline Approval Processes
The approval process can be streamlined by a contract management software, which makes it simpler to design and implement effective approval workflows. Organizations may make sure that contracts go through the required review and approval processes before being executed by using this software.
The capacity of contract management software to automate and standardize approval processes is one of its main advantages. Specific approval pathways that adhere to corporate standards and regulatory requirements can be defined by organizations. These processes can have several stages and involve a number of parties, including CEOs, department heads, and legal teams. Specific roles and duties within the approval process can be assigned to each stakeholder, ensuring that contracts are evaluated by the correct people with the relevant experience.
Automate Compliance Tracking
Software systems may automate compliance tracking, warning businesses of important deadlines, benchmarks, and requirements. The chance of overlooking important compliance activities is decreased by automation.
Organizations can set up compliance controls within the approval workflows using contract management software. These restrictions may consist of prerequisites or conditions that must be satisfied before a contract can move on to the next approval stage. Contracts could need to pass a legal review, reach a certain financial threshold, or adhere to a given regulatory standard. Organizations can enforce adherence to legal requirements and lower the risk of non-compliance by implementing certain compliance controls.
Improve Contract Visibility
Real-time contract status, important milestones, and compliance requirements are all visible thanks to contract management software. Organizations may handle compliance issues proactively and take prompt corrective action thanks to this visibility.
A contract management software can make the approval process transparent and observable. It enables stakeholders to check the progress of contracts, see what has to be approved, and keep tabs on any workflow bottlenecks or delays. Team members can proactively resolve any problems or issues that might occur throughout the approval process because of this real-time visibility.
It can also provide audit trails and proof of the approval procedure. Every activity performed within the system is tracked and recorded, including approvals, rejections, and comments. This offers a thorough audit trail that can be extremely helpful for internal or external audits as well as compliance-related objectives. Monitoring and recording the approval process helps the company be more accountable and transparent while also guaranteeing compliance.
Easily Navigate Compliance With Lexagle
Contract management software like Lexagle equips organizations with a full range of tools to help them remain on top of their contractual commitments and consolidate contract compliance among their stakeholders when handling high-end contracts and contract variants.
Lexagle relieves business partners of inconveniences and considerable financial losses while dealing with a mountain of high-stakes agreements by eliminating the tedious processes of approving, retrieving, and tracking.
Schedule a demo to discover how Lexagle can change your business today.
