As many financial services are coming under increasing pressure to improve both performance and revenue with the onset of globalization, there also comes an increasing amount of regulation and compliance to be adhered to. Especially when the contracts themselves are expanding in terms of amount and complexity. Contracts are often key to financial organisations and as such, good contract management is essential to meet the needs of governance and compliance with regulatory and industry bodies, whilst minimizing any risk to the company and improving revenue. Whilst some financial businesses may still rely on manual contract management practices, in reality this is an outdated method when automated contract management systems are widely available and can vastly improve contract administration and auditable regulatory compliance. However, regardless of method, there are a series of best practices that your business should be adhering to if you want to succeed in the financial services industry.
Have centralised documentation
A substantial part of contract management for any company is the sheer amount of documentation and data required and if your business starts to expand, having different internal management systems means administration and costs can quickly become out of control. Having all your contracts, data and documentation in and across various shared folders, can prove hugely inefficient when trying to maintain business growth and stay compliant with data regulations. Use of a system that can centralize all this information into one single, yet accessible location is paramount when you are discussing best practices. If you are manually managing your contracts, this means moving all your documents either into one physical location or transferring all your files into one place online. Therefore, we would recommend using an automated contract management system. Not only does it reduce the loss of any vital information through human error, but it can streamline the documentation process and provide easy access to data and easy management of documents, contracts, legal agreements, or financial arrangements. It also allows for growth of your business and with the sensitive nature of many contracts and documents in the financial services industry, having a centralised, cloud-based storage with all your data and contracts in one specific location can reduce the risk of exposure of secure information to unwanted parties.
Standardise your contracts and language
Having contract templates can make the initial stages of the contract process far more efficient. Although time consuming initially if creating manually, if you have contract management software, the software will usually include contract creation. Having pre-approved templates with clauses and language that can be regularly updated, improves productivity and compliance with any legal or regulatory rules. If you are using software, a library of standardized terms and clauses can help identify any contracts that may include unilateral termination provisions or indemnification clauses for example and leave your business less open to costly mistakes. However, particularly with financial services, there may be different requirements depending on the location of the client or vendor. Having a standardized contract that you can configure to your specific requirements to adhere to the relevant jurisdiction is essential to improve productivity and legal protection. Especially if your business is managing a high number of financial contracts.
Control your access and privileges
Although the need for having all your contracts safely stored in one location makes administration and accessibility far easier for businesses, when it comes to the financial services there often needs to be secure access control due to the legislation around financial data and information. You can do this by manually assigning access levels to certain parties or individuals, or by using contract management software. For example, Symfact has a configurable access control interface, so you can allow and restrict access as and when you need to. For safeguarding measures, access needs to regularly reviewed to help protect sensitive contracts and financial data and to stay compliant with any regulatory and industry bodies. Having control over the sensitive information your employees have access to and imposing restrictions at any point where necessary can also help protect both employees and your business reputation.
Negotiate and set contract KPI’s
Key performance indicators (KPI’s) should be extensively used within contract management, but especially for the finance industry where analytics are a priority regarding fact-based decision making and getting the most value out of a contract.
When you are trying to build relationships with clients and service providers, communication is essential for all parties involved. Information relating to contracts need to be readily available and communicated easily and effectively with all relevant stakeholders and persons, and a framework for tracking and reporting performance and progress is the best practice when it comes to communication and managing expectations. This allows KPI’s, contract reviews and deadlines to be monitored by all involved, hopefully producing an excellent working relationship with all parties, and helping the contract management process to run as smoothly as possible.
Regularly track and review compliance
There are two main points in compliance that need to be regularly reviewed. Firstly, in terms of the contract itself, compliance to fulfilling contractual obligations for all parties involved needs to be checked and audited. This makes sure the contract performance matches the requirements for your business and by auditing and tracking every step of a contract milestone or change, you can hold everyone involved accountable for their actions, helping give your company some protection against non-compliance whilst improving efficiency.
Secondly, you need to review your compliance in terms of regulations. Depending on your business location, this may mean keeping compliant with several different industry regulators, including GDPR. This is vitally important for the success of your business and to reduce the risk of litigation and fines which can have devastating financial consequences. Regular auditing and reviews protect the company and minimizes risk.
For any business in the financial services, contract management software can make the governance and compliance of a contract lifecycle far easier to manage and can improve the productivity of your business. So, if you want to invest in an easier future, contact us here at Symfact.