It’s fair to say that 2021 was been characterised by contract management pain points caused by accelerating uncertainty, accompanied by volatility, complexity and ambiguity as a result of the recovery from COVID-19, towards a new wave at the end of the year.
The vital lesson for Contract Managers from changes to the status quo during the coming year is that the need for speed is not diminishing and that this is now the new normal. The key learnings from this are that:
- Better information is required in order to be better prepared
- Such information must be rapidly delivered to where it’s needed for decision-making
- Adaptability, agility, anticipation, creativity, resilience and responsiveness are crucial.
In this article we’ll discuss some key challenges Contract Managers may need to consider, plan for and address during 2022. These challenges focus on external and internal triggers of risk for the organisation.
Bear in mind that not all risk is negative and in need of minimisation and mitigation. Some risk is positive and can lead to opportunities to be seized and maximised.
Whether a risk can be considered negative or positive depends on which is greater, the potential downside or the potential upside.
Whether or not responses to some of these challenges have already been prepared, a little more urgency, frequency, depth and/or breadth than typically applied to the issues is likely to be needed.
Why is this necessary? Because situations can occur quietly but escalate very quickly, catching people unawares.
It pays to be as well-prepared as possible while accepting that there’s no guarantee that any planned response to a particular situation will be effective or ultimately even relevant to what has actually happened.
The main difficulty for Contract Managers is likely to be finding the time to deal with these common contract challenges. However this is not a new problem and there are many ways to deal with it. A shortage of time is no excuse for not doing a job well.
It’s not a good look to have something fail because there wasn’t time to ‘do it properly’, then have to do it again, properly.
Risk needs to be treated head-on with considered action, not apathy and inaction.
‘Be prepared’ is the order of the day, not ‘She’ll be right”.
7 Challenges for Contract Managers for 2022
The following set of contract management pain points for Contract Managers in 2022 are likely to occur because they’ve been shaping up to be considerable problems for some time now.
It's not an exhaustive list and other challenges certainly exist in different industries and parts of the world.
Organisations that may not have experienced such challenges earlier or to any significant degree are much more likely to start to face them now or to a greater extent.
Although a sequence of addressing the challenges is implied in the order they are presented, both the order and the relevance of each challenge can be decided by the organisation as it sees fit.
Challenge 1: Check the currency of critical suppliers and critical contracts
Critical suppliers are those who provide products and/or services to the organisation that it can’t do without.
Critical contracts are those governing provision of products and/or services to the organisation that it can’t do without.
Remember that not all contracts with a critical supplier will necessarily be critical, as the supplier may also provide products and/or services that are not critical to the organisation.
Because things change over time and records may not be updated, for risk management purposes it’s worth the effort to regularly check if the suppliers and contracts currently designated as critical can still be considered to be so, as well as checking if any other suppliers and contracts should be also be designated as critical.
This work needs to be done as a foundational step for several of the following challenges.
Challenge 2: Understand what’s happening in the world that could affect the organisation
For Contract Managers, there are external and internal situations that could affect the organisation, either directly, or indirectly by impacting its critical suppliers or contracts in some fashion.
External situations might include:
- Political division, grandstanding and brinkmanship
- A perfect storm of corporate climate change including digital transformation, changing legislation and explosions of dat
- Civil unrest and disruption
- Military conflict and provocation
- Scandals involving bribery, corruption, fraud and human rights offences
- Catastrophic random weather events
- Imposition of new legislation and regulations
- Litigation against the organisation.
Internal situations might include:
- Acquisition of, mergers with, or being taken over by other organisations
- Sale of parts of the organisation to other organisations
- Dissolution or closing down of parts of the organisation
- Changes to executive management, organisational strategies or market focus
- Outsourcing of various organisational functions
- Litigation by the organisation.
Such situations need to be discovered, documented and tracked when relevant to Contract Management activities. Potential effects need to be anticipated and viable mitigation approaches proposed and planned.
These situations can represent a huge amount of uncertainty. The thing about uncertainty is that it can’t be measured, controlled or assigned a probability of occurrence, and is unpredictable in terms of future outcomes.
Because of this, there is a strong correlation between uncertainty and risk, despite each being polar opposites. The existence of uncertainty provides the basis for anticipating future risk outcomes that are measurable, controllable, probabilistic and predictable.
Two major causes of uncertainty are the dozens of armed conflicts currently progressing around the world and several national elections scheduled to occur in the next few months.
Implications and consequences are largely localised to the countries concerned with some knock-on effects on their nearest neighbours. Some of the larger conflicts, such as some of those in the Middle-East, have both regional and occasionally global effects.
Note that risk can also accompany certainty as well. An example is the ever-growing body of legislation, regulation and other governmental policy that applies stiff penalties on organisations for non-compliance.
Consider recent examples such as the introduction of the GDPR and the various investigations into the conduct of big-tech companies such as Facebook and Google.
Certainty applies here because both the obligations and the penalties will be clearly specified; the risks flow from inadvertent or deliberate failure to abide by the regulatory environment.
Challenge 3: Check the viability of critical suppliers
Depending on exactly what situations are uncovered during challenge 2 with respect to any critical suppliers, there may be a need for more regular and/or intense viability checks on such suppliers, commensurate with the anticipated risk potential of those situations for those suppliers.
The effects of extreme weather events like the wind and flooding damage sustained in Japan from Typhoon Hagibis, civil disturbance due to elections or other political situations, general economic hardship, breakdown in law and order, failure or destruction of key infrastructure and so on may also impact on supplier viability.
The main concern here is the disruption to the provision of natural resources, foodstuffs and manufactured goods, and their transport and delivery to customers.
The aim should be to determine the consequent risk to the organisation of a complete or partial failure of provision of critical products and/or services from the suppliers, and allow mitigation approaches to be considered and applied.
Our blog article How to check supplier viability provides the rationale and some guidelines for conducting such checks.
Challenge 4: Check the effectiveness of critical contracts
As with critical suppliers, situations discovered during Challenge 2 may have a negative or positive outcome on the effectiveness of critical contracts in several respects:
- Suitability: is the contract already able to deal with or cater for these new situations?
- Flexibility: is the contract adaptable to a range of situations without needing modifications?
- Changeability: can the contract be readily amended to address the new situations?
- Terminability: can the contract be terminated early if absolutely necessary?
This is another area where the changing regulatory environment has an effect and so Contract Managers should identify key contracts and any changes that need to be made to them. Some critical contracts might need updating to specify the applicability of certain legislation or certain obligations under such legislation.
Where shortcomings are identified in a particularly critical contract, discussions with relevant stakeholders should be held to determine approaches for addressing the problems.
Conversations can then be held with the other parties to the contract about amending it to increase its effectiveness going forward, or terminating it before end of term and possibly negotiating a more effective contract with the same or a different supplier.
Challenge 5: Check the organisation’s regulatory compliance
New laws, regulations and policies applicable to organisations of all kinds are coming into effect all the time so Contract Managers always need to keep the big picture on contract compliance in mind. This changing regulatory environment might apply to an organisation, for instance:
- In the country where it is registered
- In the countries or regions where it conducts business
- If it processes the personal data of residents of certain countries or regions
- If it obtains certain types of products
- If it wants to export certain types of products to certain countries
- If it wants to have certain types of products used by nationals of certain countries regardless of where those people reside.
In order to be compliant with this widespread regulatory environment, an organisation must first be aware of the applicable laws, regulations and policies, and then its applicable obligations and penalties for non-compliance. This information is most likely to be provided by the organisation’s internal or external legal team.
It is crucial that this information is collected, documented, updated when necessary and made available to the organisation’s Contract Managers, who can discuss the details with relevant stakeholders in applicable contracts.
Contract Managers and stakeholders can then establish mechanisms allowing the organisation to comply with the regulatory obligations applicable to each contract.
Many governments are beefing up the compliance policing capabilities of their regulatory bureaucracies. They are also demanding that these bodies earn their keep far better than they have done in recent times, by identifying, naming and shaming non-compliers, and applying sufficient punishment for the level of non-compliance to act as a deterrent to others who might be inclined to act similarly.
The arrogant, the chancers, the foolhardy and the inept are on notice. A few scalps are often necessary for the message to be received.
Our blog article How to manage contract obligations compliance provides guidelines for conducting regulatory compliance checks.
Challenge 6: Getting contract stakeholders onside and keeping them there
A contract stakeholder is somebody with a vested interest in the purpose of a contract. This interest could relate to ownership of the contract from a budgetary or operational perspective, as a user of the contracted products and services, as an approver of the acceptability of the terms and conditions, and so on.
Contract Managers typically rely on stakeholders to participate in various contract management activities. This can range from providing guidance about why and how a contract needs amending through to validating the supplier’s service delivery performance.
Every organisation contains cliques, factions, naysayers, recalcitrants, 'white-anters' and the generally 'unpleasable'. Many have entrenched positions, separate and conflicting agendas, a ‘what’s in it for me’ mentality, or attributes not conducive to working for a common cause. Others of course are more than prepared to do what it takes to get the job done. This is just life in a nutshell.
While disagreement can be professional, personal, political or presumptuous, and herding cats can be easier than obtaining a consensus on a particular matter, the key to getting stakeholders onside and keeping them there is regular interaction to:
- Fully inform them of the benefits of their participation in contract management activities
- Provide advance notice of planned contract management activities
- Obtain feedback on the performance of the supplier and the contract
- Listen to their concerns about any operational or other issues that need to be addressed
- Provide feedback about progress on addressing their concerns
- Regularly thank them for their efforts in ensuring a successful contract.
High levels of engagement between Contract Managers and stakeholders should lead to each side gaining a better understanding of, and providing support for, each other’s role and drivers, which is always a good thing.
Challenge 7: Coping with the Contract Management workload
There always seem to be more new contracts starting than old contracts ending. Every new contract deemed critical, or important enough to warrant active management, adds a range of start-up activities to the regularly scheduled activities the Contract Manager has to deal with, plus its own set of scheduled activities.
Some expiring or terminating contracts similarly add a range of close-down activities to the scheduled workload. Some also might continue to need scheduled activities to be performed for a period following expiry or termination.
So, how does a Contract Manager cope with an ever-increasing inventory of active contracts? Let's look at how contract tracking systems and dedicated solutions can help.
First, maintain records of the scope and volume of work, like a calendar of scheduled activities including planned holidays and training, timesheets, calculation of various statistics and trends, plus anything else easily gathered that presents a clear workload picture.
Second, propose and cost a range of options that can help alleviate the situation. Some of the usual suspects (in increasing order of likelihood and decreasing cost) include:
- Get more trained staff
- Get more staff and train them
- Get better technology, including dedicated CLM software
- Make better use of existing technology
- Automate more processes
- Optimise more processes
- Implement some new processes
- Reduce the number of contracts actively managed.
Third, discuss the situation and proposed solutions with the Contract Management team leadership. Seek acknowledgement of the workload issues and agree on the most viable approaches for dealing with them.
Fourth, follow any established business case process or its equivalent to advise organisation management about the problem and a recommended solution.
While the first four options above are often constrained by cost, the remainder commonly involve no further cost so are much more palatable to the organisation, if not necessarily to the affected Contract Managers.
Some, all or none of the proposed options might get approved and implemented. It depends on available budget, organisational priorities and so on.
Fifth, regardless of any success of the business case and the implementation of an approved solution, take steps to minimise distractions preventing achievement of goals. There is plenty of online guidance about this that includes:
- Set up ‘do not disturb’ times in the calendar system or presence system used
- Set office and mobile phones to voice-mail during the ‘do not disturb’ periods
- Establish set times outside the ‘do not disturb’ periods to check emails
- Respond appropriately to emails needing immediate attention, otherwise acknowledge receipt and advise when a proper response can be expected.
Finally, prioritise the workload to separate the ‘must do’ items from the rest, but take account of deadlines already established.
There’s no universal solution to this universal problem. A combination of circumstances, budget, priorities and personalities unique to the organisation will determine just what a Contract Manager can and can’t do about workload issues.
It seems that the only certainty about the future is that the future is uncertain. The unexpected keeps happening, often defying logic, established practice, good manners and common sense.
It’s like a car crash between Murphy’s Law and the Law of Unintended Consequences.
The agile can find opportunities to exploit in such an environment, but risk is far more prevalent.
Contract Managers are faced with their own set of peculiar challenges and risks, a microcosm of the general global entropy.
Creating contract management plans and scheduling the activities necessary to address these challenges is key. This in itself will add to the challenge of coping with the generally significant workload of your typical Contract Manager. Contract stakeholders should be advised of any additional expectation of their participation in dealing with the challenges.
In this article we’ve outlined the expected key challenges for Contract Managers in 2022, and suggested approaches for dealing with them. Ultimately though, it’s up to Contract Managers, their teams and stakeholders to plot a path through the specifics of the challenges they identify for themselves.