As 2020 draws to a close, it’s time to look ahead to a new year. The past 12 months have been intensely challenging and, in some cases, devastating for businesses around the world as the Coronavirus pandemic spread from country to country, leaving economic catastrophe in its wake. It was a year in which we all had to climb the steepest of learning curves – adapting to new ways of working, and to greater reliance on technology for day-to-day operations.
That steep learning curve was littered with stark lessons in Contract Management and, ten months in to this pandemic, it’s now time to enter a new phase. The year 2020 was necessarily defined by reactive approaches to Contract Management – dealing with an unprecedented event in real time, and addressing its impact on our Contract Libraries. It is vital, in 2021, that we hit the ground running and turn that reactive stance into proactive policy. Now that this pandemic has rolled across the world, it is time to take a moment to ensure that we are not caught unawares again – insofar as is possible.
The lessons to take forward
Even the most agile of businesses will have found 2020 difficult to navigate, with profits being impacted to high degree. As suppliers and customers alike faced financial struggle, most transactions became very cautious in nature. The immediate reaction by most businesses, in terms of Contract Management, was the tried and tested filtration-remediation response. This is the set of steps undertaken in response to significant, impactful events, including the transition from LIBOR to SOFR, and also Brexit. This process involves filtration of contracts to identify those affected, analysis of the impact, and the setting of remedial actions.
The context of the Coronavirus pandemic, however, meant that there were a number of other factors to consider, and equally urgent actions to take, including:
- Contract performance audit – With unprecedented financial disruption, contract performance audits became even more important in terms of cost-cutting exercises. Analysing the performance of each contract to determine its value and productivity is, in the normal course of events, good business practice. In 2020, it became part of business-saving strategies.
- Re-evaluation of risk assessments – In business, we are constantly seeking to mitigate risk, in our activities, and in our contracts. The 2020 pandemic delivered an entirely new risk, and a whole range of new risk impacts, which needed to be specifically addressed.
- Invocation of emergency clauses – Well written, professional business contracts should always include emergency clauses, such as Force Majeure, and their invocation became commonplace during 2020. In order to do this, further filtration and identification was needed, to determine which contracts included which emergency clauses, and what the specific terms were.
It is the emergency clauses that are the biggest Contract Management lesson to take into 2021, because these are key to using the lessons learned in 2020, to future-proof your business. More specifically, it is a lesson in language.
The impact of the Coronavirus pandemic, and the response actions it prompted during 2020, highlighted to many businesses the areas in which contract language can be improved to not only ensure business continuity, but also to provide a full range of targeted recourse in the event of another pandemic-level event. The completion of this remedial work is vital, in order to move from a reactive response, to a proactive stance, in 2021.
Force Majeure is the main emergency clause that springs to mind in terms of the Coronavirus pandemic, because it applies when events that are beyond the control of every party lead to a failure in fulfilling the obligations outlined in the contract. So, if Coronavirus meant that your business was unable to deliver goods or service in anyway, the Force Majeure clause could be used. But, other emergency clauses could also apply, depending on the circumstances of your business, and the industry in which it operates. For example:
- Delivery of notices – Where certain notices require hand delivery, these may have been disrupted, or entirely prevented, by Coronavirus restrictions.
- Doctrine of impracticability – The obligations of the contracted parties are either delayed or excused by the doctrine of impracticability.
- Frustration of purpose – When the purpose of the contract is no longer possible due to unforeseen or unprecedented circumstances, the frustration of purpose clause may apply.
Each of these clauses may be involved in the Coronavirus response of your business, and they each require a tightening up of language in order to make them fit for purpose in 2021 and beyond. Such language adjustments might be the inclusion of the term “infectious diseases,” for example, to specifically cover the impact of future pandemics.
When it comes to remedial work on your Contract Library, the solution is always Contract Management Software, because this includes a centralised language repository, or clause library. It means that you can standardise language and terms for all types of emergency clause, and ensure that it is accessible to all necessary personnel, at all times. A key part of this is the fact that the very best Contract Management Software packages, such as Symfact, use cloud-based storage. This means that staff working remotely can use the necessary standardised material through permission-based access – logging in to your system from any web-enabled device, from any location with internet access.
This is perhaps the other, vital lesson learned from the events of 2020. Along with the need to standardise and future-proof your contract language, it is of the utmost importance that your personnel are able to get the necessary work done on schedule, and in full compliance with regulations and governance, from anywhere in the world. This keeps your team safe and productive, and your operation always moving forward.
As your business continues to look for ways to navigate the financial uncertainties of the ongoing pandemic into 2021, Symfact Contract Management Software is the best choice to welcome in a new year, and to improve your Contract Management in a pandemic world.