4 contract risks keeping you up at night

What’s more terrifying than ghosts and goblins this Halloween? Those scary, contract risks that pop up and keep you up at night.

“Where are all of my contracts? Did I remember to send that contract over to Procurement for their review? Did I make a mistake or miss something along the way? Will I make a mistake that costs the company money?”

We’re human; we’ve all been there! No one is perfect, contracting mistakes happen, or key details are missed, resulting in unidentified contract risk. Let’s take a deeper look at some of those pitfalls and how you can avoid them this spooky season (and beyond).  

Skeletons in the closet: Breach of contract consequences 

While it is hopefully an uncommon occurrence, everyone finds themselves with a skeleton in the closet every once and a while. And, while they’re hidden away in that dark closet, they’re hard to find and unanticipated, until they jump out to scare you and wreak havoc on your business. Contract breaches can bring about legal disputes, financial penalties, and damaged relationships. Ignoring this contract risk now can result in consequences that haunt your operation for years to come.  

To avoid discovering these skeletons, proactive risk mitigation is key. Focus on clear definitions of terms, obligations and deadlines and perform periodic audits of all your active contracts to prevent surprises.  

The phantom of non-compliance: Regulatory failures 

Similar to the skeletons in your closet, the phantoms of non-compliance are a bit more common and float directly through your contracting halls, waiting to strike when you least expect it. Regulations are constantly evolving, with new laws and requirements appearing from seemingly nowhere, introducing yet another contract risk. Businesses spread across multiple regions or industries have to keep up with a complex web of regulations. Failing to update contracts or business operations accordingly can put your business in jeopardy of non-compliance without even realizing it.  

The consequences from the phantoms of non-compliance floating around your business could be anything from hefty fines and penalties (like up to 4% of annual global revenue for GDPR noncompliance in the EU) to costly operational disruptions and downtime, and more. Staying vigilant by performing regular contract audits and implementing standardized contracting processes and templates can help exorcise the ghosts in your contracting house. For example, Contract Lifecycle Management (CLM) tools like Agiloft allow users to maintain templates with conditional and dynamic templating ability, so you can differentiate language by region, product type, and more.  

Zombie contracts: Outdated agreements coming back to bite you 

While regulations are all around us, floating like apparitions throughout our contracting house, one pitfall to be truly scared of? The ones living outside in your backyard, that you’ve long since forgotten about: the Zombie contract. Even in our personal lives, that random auto-renewal will show up on your bank statement or come through as a thank you email in your inbox and the thought is always the same: I thought that contract was dead!  

Subscription-based services are standard, and as more and more businesses continue to move to this service model, the more opportunity to miss an autorenewal or ability to forget to cancel a service altogether. How can you make sure these zombies are dead and gone for good? Tools like CLM platforms can provide automated alerts and an added layer of visibility to avoid these unwanted contract renewals in the future.  

Vampires in the fine print: Hidden liabilities 

Contracts can be filled with hidden liabilities, that, like vampires, will bite you and slowly drain the life out of your business. While not apparent at first glance, they can surface unexpectedly with things like: ambiguous terms and conditions, buried indemnification clauses, uncapped liability provisions, termination penalties, and more.  

Like vampires, they’re quiet and unassuming, but capable of flying in when you least expect them. Ensure you are performing detailed contract reviews, using templates. Consider implementing a CLM that can compare and grade contracts against your standard and accepted language like placing a garlic necklace around your process, mitigating overall contract risk and protecting your business from future bites.  

Don’t get tricked by contract risks 

Even beyond the Halloween season, we’re all vulnerable to the odd ghost or goblin entering our contract language. Ensuring standard templates, detailed approval workflows, and routine auditing is the closest you can get to a contracting ghost catcher living right in your front yard and mitigating true contract risk! 

Sleep better at night knowing that your contracting Boogeymen have been put to rest. Start the conversation with our expert contract ghost hunters today!