In business, risk is among your biggest concerns. The way you choose to manage risk can determine how you conduct your operations, and how you proceed with important projects and deals; risk management can influence your hiring practices and your choice of suppliers and vendors. Indeed, risk management is not just about health and safety. While it is important to reduce the chances of someone slipping on the floor in your reception or office area, so your company is not subject to a personal injury claim, risk management is not just about the prevention of physical injury. It’s also about knowing exactly who you are doing business with, where, and why.
Any contract, agreement, or business relationship entered into comes with its own risks, and management of risk is about deciding upon the level of risk that is tolerable to the interests of your organization. A deciding factor in that process will be the nature and size of your business, of course, but each enterprise will come to select its own comfort level in terms of the risks it is willing and able to effectively manage.
So, the question then becomes, how is risk managed effectively? If each contract, agreement, or a business relationship has its own, specific risk factors, and your organization has numerous of each to deal with, how can these varied types of risk be monitored and handled in such a way that the company is protected?
The answer to that question has changed in recent years. In the past, risk management was an unwieldy task, handled with a range of spreadsheets and databases by a disproportionately large section of the workforce. This meant that it was expensive and time-consuming, and not always effective. Oversight was problematic with this type of system, and timelines were difficult to handle. Deadlines and milestones would be missed, and this would incur greater cost or reputational damage.
In today’s business world, however, there is Contract Management Software, and the very best of these packages are specifically designed to make risk management for your business not only easier to undertake on a daily basis but also more effective in terms of protecting your commercial interests.
The key to effective risk management in business is reporting. In the most simplistic of terms, in order to manage risk we must first know two things:
- The nature of the risk
- When the risk is likely to be greatest
But, how do we gain this knowledge in a large corporate environment, and in a cost-effective way?
When entering into a contract, agreement, or business relationship, we must first know who we are dealing with. This is a significant factor in assessing and managing risk, and the consequences of failing to undertake this due diligence can include investigations by regulatory and federal authorities and, potentially, damaging legal action. This is because, in the world of modern business, we are required to be on our guard against a wide range of negative, and sometimes criminal, influence.
The right Contract Management Software includes features that enable advanced security profiling and background checking of both businesses and individuals. This affords you the opportunity of avoiding entering into transactions with those that may do your business harm. These features also bolster, centralize, and streamline your ability to investigate businesses and individuals, which helps you make informed decisions about the future of those relationships.
This is particularly important in the current age of cybercrime, international money laundering, and the financing of terrorism through complex online means. With our daily business processes having become increasingly digital, we have increased vulnerabilities to inadvertent association with a potentially criminal enterprise. Moreover, it’s not just about who we are dealing with, but also where they are because certain countries and locations are subject to sanctions on a federal, or even international level. By utilizing the investigative features in Contract Management Software, we are better able to authenticate and monitor those individuals and businesses with which we are dealing.
So, that’s how we use Contract Management Software to identify the nature of risk. Risk assessment is not a single decision-point, though. To ensure success, it must be an ongoing process of monitoring and assessment, in order to achieve pro-active oversight. By the very nature of any business, risk levels will fluctuate over time, and in response to the many variables in the corporate and project environment.
Where humans are involved, risk is always present. Your initial risk assessment of a new business relationship may have indicated that risk is low, but then, later in the project or relationship, a milestone approaches that temporarily increases risk. Or, the third party itself takes on a new business relationship elsewhere that is considered high risk, according to your own business model and decision-making frameworks. This will impact your own risk assessment and, perhaps, may even jeopardize the security and success of your own enterprise. Without ongoing monitoring and assessment, your business is constantly on the back foot – playing catch up and reacting to change, rather than being ahead of it. It’s the difference between responding after the fact, and leading the field against your competitors.
Consistency in security profiling is therefore important, but accurate reporting also plays a key role in pro-active oversight. It allows your risk management professionals to plan for periods of increased risk by providing a clear picture of timelines, milestones, and deadlines. It also allows for immediate and effective incident management, which can help your business in the early detection and prevention of fraud. Accurate reporting also helps businesses mitigate the risk that comes with regulatory compliance. It provides a consistent auditable trail – building a detailed record of secure access and actions, as well as evidence of all due diligence. Standards, processes, and business rules are enforced, and the proper governance and compliance is ensured.
Customized risk management
Once we know the nature of the risks, and we know when the risk is likely to be greatest, it is important to ensure that those risks are assessed in a customized way – that is, that they are assessed in relation to your business as it is now, and as you intend it to change over time. This is important, because businesses are rarely a static enterprise and, when we enter into contracts, agreements, or business relationships, those are commitments that come with a detailed timeframe. You need to have a clear projection of change in your own business in order to properly consider how that change intersects with the risks you are assessing.
The right Contract Management Software package will deliver fully customizable user experience, enabling you to completely tailor fields, screens and processes to suit the nature of your operation. Not only that, but it will allow for those customizations to be altered over time, as your business grows. In the best of business circumstances, growth is expected. But, with the adoption of Contract Management Software, growth is almost inevitable, as savings are made in both cost and time. A more streamlined organization can achieve far more than one that is weighted down by cumbersome and outdated risk management systems.
This level of customization works perfectly with the standardized approach that Contract Management Software provides. It enables you to create consistent risk models and processes that can be applied, company-wide, in a fully secured fashion. This speeds up deliberations and delivers decisions in a shorter timescale – all of which leads to increased productivity for the entire enterprise.
Along with those risk models, the best Contract Management Software packages allow for the design, building, and publishing of Intelligent Questionnaires. These documents are invaluable as core pieces of the puzzle involved in embarking on new business relationships, and the Central Repository that forms the basis of Contract Management Software means that those Intelligent Questionnaires can be made available throughout your organization. Business continuity is assured, and standardization can take effect across all departments.
The ultimate benefit of customizable risk management processes in Contract Management Software must be transparency. While data and access is kept completely secure, enterprise-wide transparency means Third Party profiles are centralized and available to relevant personnel. This keeps your organization aligned in terms of governance and compliance, and again, speeds up the risk assessment and decision-making processes required for making progress.
Saving time and money
To succeed in business, corners should never be cut - so a risk management solution that increases performance while decreasing costs in terms of both time and money is surely the goal. Building growth and any future expansion on a solid foundation of thorough compliance and accurate third party due diligence is undoubtedly the best way to take your organization to the next level. It requires a clear and in-depth understanding of risk management, and the way this relates to the nature of your business, but the right Contract Management Software package can help you achieve exactly that.
Contact Symfact today to book your demonstration.