Author: Matt Tuson, SVP & MD EMEA, Conga
In the finance industry, it is all about the customer. However, it is difficult to cultivate and nurture client relationships – such as between a broker and customer, an insurance agent and enterprise account, or a bank and its account holder – with mountains of manual documentation and slow, inefficient processes.
In addition, regulatory issues are constantly evolving in finance – becoming more complex and more rigorous – while competitive market forces and pressure from fintech firms continue to grow, as do requirements for cybersecurity and consumer data protection. With the right tools, financial services companies can create an intelligent, connected experience across all of their documents and contracts.
Putting the business at risk
Contracts are the coin of the realm, defining relationships and interactions between businesses, regardless of business type or size. In the financial services industry, the number of contracts governing business-to-business interactions are proliferating – including loans, new account openings, etc. Indeed, the average business maintains 20,000 to 40,000 contracts.[1] However, if they are not well-administered, they introduce an area of significant potential risk and loss.
Many companies have not taken steps to update and optimise their contract management processes. In fact, fewer than 10 percent of organisations have implemented digital systems to streamline contract management. This is often the case for financial services firms and this can not only leave them out of touch with today’s digital world, but far behind their nearest competitors.
Like many business processes, relying on paper-filled filing cabinets or rudimentary online systems to house contracts is inefficient and creates significant risk. In fact, a significant percentage of all contracts are actually lost, essentially ensuring that terms and conditions will not be monitored and carried out.
For legal and procurement, in particular, non-compliance and performance violations are the essence of significant risk. Companies spend 60 percent of their revenue on external supply, while few have invested in systems to oversee a large variety of independent contracts and relationships. It comes as little surprise that this is still a major issue in the financial arena.
Ensuring compliance and protecting company and customer data has never been more important. With regulations, including the UK Companies (Audit, Investigations and Community Enterprise) Act 2004 and the EU General Data Protection Regulation (GDPR), financial institutions must maintain a close watch on the entire lifecycle of its services.
Eliminating manual processes
Financial services professionals need intelligent automation solutions to address these difficulties, such as a contract management solution. This can help eliminate time-consuming, manual processes and enable financial service professionals to complete financial forms, contracts and documents in record time and with fewer areas, whilst ensuring compliance.
Efficiency and productivity
Only by adopting automation technologies as part of a carefully planned, wider-digital transformation initiative, can businesses ensure efficiency and truly mitigate risk. Moving contracts to a state-of-the-art, automated interface leads to better standardisation and consistency, while cutting contract creation time in half.
Integrated workflows, alerts and notifications, and templates further reduce administrative load and significantly shorten contract cycles, reducing the contract negotiation cycle by up to 50 percent, and overall contract cycles by as much as 60 percent. By adding an electronic signature feature to its contract solution, a company can cut down its contract cycle from a 3.4-week average to five days or even less.
In fact, the Law Commission recently ruled that electronic signatures can now be used as a viable alternative to handwritten ones[2]. Electronic signatures are now capable in law of executing a document, including trust deeds, providing that the person signing the document intends to authenticate the document and any formalities relating to execution of the document are satisfied.
Increased visibility and control
With the conversion to a single, searchable, electronic contract repository, financial services companies will gain visibility and control into all contracts. This means that the diverse information within each contract can be viewed at any time, enabling financial services professionals to search for and act upon information quickly.
For more complex contract scenarios, such as for procurement or legal teams, businesses can spot and leverage connections that might not have been visible before, such as multiple, separate contracts with the same party. Another key feature is the ability to view and manage contract families, so that you can navigate all related contracts and understand their relationships within the contract’s hierarchy, as well as access all related documents, in one spot. This can be hugely valuable in financial services firms.
Additionally, deep visibility into the contract cycle creates the ability to uncover underperforming contracts, and it opens up a broader view to help you understand if there are slow-downs or pain points resulting from certain contract types, stages, or parties. Businesses can even find contracts based on conditions that create risk, parsing your view by regulatory requirements, products, location, or other features.
Mitigating compliance risk
Financial services can protect sensitive client and institutional data, while complying with the latest laws and industry regulations. A contract management solution will not only flag potential compliance red flags including audit issues, but it also helps ensure compliance through automated document retention.
Depending on the type of document, there are strict policies in financial services as to the length of time that documents need to be retained. An easily configurable contract management solution can automate document retention procedures to guarantee compliance in accordance with a company’s unique scenario.
Empowering financial service professionals
Ultimately, failing to act now and address holes in the contract management process within a financial services firm will lead to greater losses and higher risk in the future. With intelligent automation solutions, such as contract management technology, financial services professionals will benefit from greater efficiency, productivity and visibility, as well as effective compliance, and control.
[1] http://cmsd.nl/wp-content/uploads/2015/10/memba_pwc_contractmgmt.pdf
[2] https://www.lawcom.gov.uk/project/electronic-execution-of-documents/
