Sunday, June 23, 2013

What Makes Contract Risk Management Efficient

By Lana Bray


Nowadays contracts are the foundation of every business and it has even increased its complexity over the years. Contracts are not only valuable between employee but also among business partners. These contracts reflect the terms and pricing as well as services expected from partners, customers and suppliers. Without any contract risk management, contracts and agreements could be in chaos leaving your company vulnerable to any kind of risks and threats.

Contract management can be defined as the monitoring and execution of contracts to be able to minimize risks and most importantly, maximize operational and financial performance. It involves monitoring purchases on the contracts to make sure that preferred suppliers are the ones used, rebates and discounts are collected and lastly, proper rated were adhered to.

Most entrepreneurs believe that a major area of concern towards the safety and credibility of the company is contractual risks. To lessen the risks which threatens a business ability to profit and survive companies could either secure an insurance or hire professionals that could manage the contracts for them in the best and most efficient way possible.

As the name implies, these services monitor contracts to maximize financial operation as well as reducing any possible risks. It may also include tracking purchases according to what has been agreed and make sure that the rates remain the same, rebates and discounts are collected and most importantly the preferred suppliers are used.

To avoid such consequences, companies should improve control and management on their contacts. Inefficient control are said to costs businesses one hundred fifty three billion dollars a year. Understanding contracts deeply is a fundamental part of managing risks associated with it. For entrepreneurs to protect their company, they need to be more proactive in identifying contractual risks.

This could also promote visibility for example, when one purchase goods from suppliers. It somehow lets the owners know whether or not they are buying from the right price and quantity. It may also help a business to standardize terms and conditions that have been consistent for years. Furthermore, it informs one if suppliers are located in higher risk area because of its geographical location.

With such system, reporting to the owners of the company, auditors and government authorities will be a lot easier. And as corporate functions become more transparent, corruption will be prohibited finances will be controlled. One of the ultimate objective on this system is simply to remain clear or transparent among one's business partners.

The actual process of managing contractual risks varies to every type of company or business. But regardless of what business one's company is dealing, these professionals will still be able to manage those contracts which may have been neglected for some time now. These services may come with a price but its benefits far outweighs the costs.

Contract risk management services is highly recommended particularly those companies starting to climb their way to success. If one think that his contracts are beginning to be neglected, then seeking assistance from skillful professionals is a great idea, perhaps even the best.




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