The Benefits of Automating Contract Management

Contract management is the glue that holds organizations together. Businesses must draft and approve complex documents while keeping everyone happy and within legal bounds. Automation can help make this process faster, reduce inefficiencies, and mitigate risks—but it’s important to approach it with a focus on risk.

Risk managers know better than anyone how new tools can create vulnerabilities for the company. Missed deadlines, lost records, and security gaps all lead to losses and business disruptions. Contract management automation, when implemented thoughtfully, addresses these concerns while streamlining processes and reducing waste.

This article explores how contract management automation with a risk-based approach can help your organization reduce errors, save time, and protect against potential pitfalls.

What Is Contract Management Automation?

Contract management automation uses software to support and simplify tasks like tracking deadlines, monitoring compliance, and managing documentation. Rather than replacing human expertise, automation handles repetitive tasks, enabling teams to focus on more complex, strategic work.

Contracts go through lengthy processes of creation, review, revision, and approval. Traditionally, this involves manual work, which can be slow and error-prone. Automation tools streamline this by:

• Setting automated reminders for deadlines.
• Streamlining the renewal process.
• Monitoring compliance with regulations.
• Centralizing storage and providing real-time analytics for key metrics.

Risk managers, in particular, can use these tools to proactively spot legal issues, ensure everything is audit-ready, and address risks before they escalate. With automation handling repetitive processes, resources are freed up for high-value tasks.

Why Use a Risk-Based Approach in Contract Management?

Risk managers know how important a risk-based approach (RBA) is for their organization. An RBA emphasizes identifying, understanding, and preventing potential threats from affecting the business. Contract management is a minefield of risks. Sensitive data and legal requirements are just some of the hurdles managers face. Addressing data security and regulatory compliance proactively can help your team avoid breaches and penalties.

Risk teams can predict contract management issues and take action before they escalate. For instance, by linking contracts to regulatory compliance requirements, risk managers can ensure adherence to standards like the Sarbanes-Oxley Act (SOX), reducing the chance of penalties and legal exposure. This will improve overall success through better accountability and risk prevention across the organization.

Key Benefits of Automated Contract Management

Automating your contract management is a great way to make complex, time-consuming tasks easier. Automation can manage contracts to reduce errors and ensure compliance. Here are the main benefits contract automation brings to the table:

1. Better Efficiency

Manual contract work involves repetitive data entry, deadline monitoring, and document tracking—tasks prone to bottlenecks. Automation eliminates these hurdles so team members can focus on more complex jobs, while risk managers can find contract risks and identify clause impacts faster.

Use automated reminders and digital workflows to speed up approvals. With fewer delays, there’s less risk of missing a deadline or losing important information.

2. Increased Accuracy

Contract errors can mean dealing with expensive penalties, reputation issues or lost deals. While humans are great at complex work, it’s easy for even the best employees to miss small details on repetitive tasks. Automation reduces these mistakes. It can standardize contract language and flag discrepancies.

Your team will have a safety net for errors and enjoy consistent contract language. Built-in compliance checks can even help organizations adhere to regulations like the Sarbanes-Oxley Act (SOX).

3. Improved Visibility

Automated systems have centralized dashboards with real-time insights. You can easily see all your contract statuses, deadlines and risks in one area. This visibility helps risk managers address potential issues proactively. Risk managers can see noncompliance on contract expiration details before they become larger issues. Better visibility means fewer hidden risks and better contract management.

4. Lower Costs

By automating routine tasks, organizations can cut down on administrative expenses while avoiding fines, missed deadlines, and disputes. Automation reduces paper processes and manual errors, contributing to significant cost savings over time.

Challenges in Automating Contract Management

While automation can transform your contract management, you may encounter a few hurdles. Organizations and risk managers need to know the challenges involved in successfully implementing automation. Potential complications include:

1. Data migration: Moving from manual or legacy systems takes time and effort. Risk managers must accurately transfer all contract data without losing important details. This task can leave you at risk for errors.
2. Limitations: Contracts often need specific workflows, terms, and approval processes. Your team needs automation tools that are flexible enough to meet these requirements. You might face functionality gaps, or your team might need to adapt its processes to the software. Try to get tools that work with your needs instead of against them.
3. Security concerns: Contracts hold sensitive information. Risk managers must prioritize strong cybersecurity measures. The average cost of a data breach is $4.88 million for companies. You need good safeguards to protect your organization from compliance and security issues.
4. Employee doubts: Automation can seem like a disruption. It takes over some employee tasks, which can make teams hesitant to embrace it. Resistance to change can slow adoption and reduce efficiency. Clear communication and training can help overcome this resistance and demonstrate the benefits of automation.

Best Practices for Successful Contract Automation

Everything comes with challenges. Using the best practices helps prevent contract automation risks and keeps your organization efficient. Use these strategies to transition to automation successfully:

1. Set Clear Goals

What is your organization looking to get out of contract automation? Set clear goals around compliance, processing times, or risk oversight. Having clear goals lets your team track progress and adjust as needed. Use support tools to analyze risks and get suggestions on best practices to avoid problems. With proactive tools and actionable goals, it’s easier to stay on course.

2. Centralize Data

Data silos create communication issues and leave your organization open to new risks. Teams need access to information without worrying about errors or missing context. Investing in integrated platforms gives organizations a centralized view of contract data. You can easily link contracts to risks, controls, and compliance requirements without creating more data silos.

3. Use Real-Time Monitoring

Automated tools help reduce manual tasks, but how do you know if they’re performing well? Real-time analytics can track contract performance and compliance.

Real-time risk analytics gives you dynamic monitoring so you can address risks before they become problems for your contracts.

Avoid Contract Risks With LogicManager

Managing contract automation means constantly watching for risks and errors. The smallest issue in one contract can ripple out to the rest of your organization, affecting everyone. LogicManager’s Risk Ripple Analytics empowers organizations to take control of their contract management.

Our solutions help you uncover hidden threats, delivering invaluable real-time insights. Use our Risk Ripple Analytics to address minor issues before they become major disruptions.

Make contract automation easier and more productive with a risk-based approach. Request your free demo and see how LogicManager can help you drive growth!