As businesses face macro events including recessions, supply chain disruption and evolving regulations, we predict that businesses of all sizes will be focusing on resilience, recession-proofing and risk mitigation throughout 2023.
Businesses that double down on improving their processes, in particular moving from manual to automated, are those who will navigate the year most successfully.
Let’s take a look at these trends in more detail and explore how to build robust contract and vendor management approaches to keep your business protected, profitable and compliant.
1. Resilient businesses will be defined by proactive processes
Relationships don’t always run smoothly and that’s why businesses need to actively manage their contract agreements. When agreements are left to run in the background, without any review, expected outcomes will fail to materialise.
It also means companies are poorly prepared for any disruption - as they often don’t know how their agreements will be impacted.
Disruptions do happen and take on many guises. It can be on a global scale, such as a pandemic or war that leads to operational issues. It can be on an individual business basis, such as poor vendor performance. It can also be on a personal level, such as a cyber attack that targets your CFO in a bid to retrieve financial information.
Whatever the disruption is, resilience can only be achieved when your business is able to adapt to changing circumstances whilst staying in control."
This means knowing what clauses are in your contracts such as Force Majeure, how vendors will adapt to any new circumstances, the level of impact your business will encounter and how this will affect your customers.
In the year ahead, your business needs to fortify its processes around any potential weaknesses."
Visibility and proactivity are key to building resilience into your processes.
Stakeholders across your business should ask the following questions:
- Do we know how our vendors are performing?
- What vendor management KPIs do we hold them accountable against?
- Do we have a plan in place to address poor performance?
- What level of third-party risk are we facing?
- Are we tracking contractual obligations effectively?
- Are we aware of the risk and security profiles of each of our vendors?
- Do we have a framework or any alternatives in place if a service isn’t provided?
If the answer to any of these is no or ‘don’t know’, it’s time to go back to the drawing board on your processes. Resilient businesses aren’t just able to answer these questions. They are able to make use of their total visibility to drive early action such as:
- Creating review points with vendors and addressing poor performance
- Building KPIs into the negotiation phase so all parties know what is expected
- Terminating relationships based on non-compliance surrounding finance and security
- Defining business continuity plans in the event something goes wrong.
Resilient businesses have flexible processes that allow them to pivot whenever it’s necessary. To get ahead of a potentially turbulent year, refine your contract and vendor management approaches so that reactivity doesn’t leave you stranded in the face of unknowns.
2. Businesses will focus on recession-proofing
Contract and vendor agreements are always entered with the premise that they will add value to the business. This value can be strategic, operational or service-led.
As businesses seek to recession-proof their bottom line, CFOs will want solid facts and figures about which relationships are working, which agreements are providing the most value and which vendors they should keep investing in. Any agreements that don’t provide negotiated outcomes or meaningful value are likely to be consolidated or removed entirely.
In short, businesses need to focus on what is working, what is delivering revenue and how it can double down to keep cost margins minimised."
We are entering a period that will potentially see a lot of consolidation across contract and vendor portfolios. Savviness both pre and post-execution will put businesses on a stronger footing to maximise potential value.
This will involve:
- Stronger due diligence during vendor selection, driven by financial risk data.
- Negotiating better terms from the outset of a relationship
- Capturing and analysing spend data to inform consolidation opportunities
- Preventing missed renewals through improved contract management.
Businesses won’t just be looking externally to see where they can reduce their cost margins. They’ll also be looking internally for optimisation opportunities. This doesn’t have to mean how to reduce headcount. Rather, it means how to achieve more with less time, effort and resources.
We will start to see more businesses lean towards digital contract and vendor management solutions in a bid to save time and effort via automation.
Using contract and vendor management software allows businesses to:
- Automate internal processes and manual tasks
- Reduce levels of administrative work and low-value activities
- Allow key stakeholders to prioritise more strategic areas
- Dedicate more time to tracking spend and performance to ensure outcomes are met
3. Businesses will double down on managing risk and compliance
Risk mitigation strategies underline the approaches that businesses take towards building resilience, maximising revenue and maintaining compliance. As well as being able to pivot and remain profitable in what may be a turbulent year, businesses also need to be prepared to prove compliance with any existing and new regulations.
Risk can be all-encompassing meaning businesses need to focus on reputational, financial and cyber risks if they want to keep their business protected."
In the coming year, businesses will place a greater emphasis on ensuring that their contracts include appropriate provisions to address potential risks. This could involve including clauses that outline how risks will be managed or shared between the parties, or establishing procedures for addressing potential disputes.
They will also give greater focus to due diligence throughout the supply chain. Businesses will lean on risk intelligence more than ever before as they prioritise building a holistic view of their vendor base and third-party risk.
Carefully reviewing and evaluating information about a vendor’s operations, financials and security measures will allow businesses to decide whether to initiate a contract with them."
Retrospectively evaluating this information from existing partners will also help businesses to take pre-emptive action if non-compliance could be on the cards.
Contract and vendor management software can help businesses:
- Easily track the entire vendor base through a dedicated Vendor Portal
- Access integrated risk intelligence feeds for financials and cyber security through
- Set RAG statuses for each vendor to understand their risk profile
- Trigger risk mitigation workflows across the business with automated workflows
- Send automated reminders to vendors when documentation needs updating.
If you’re ready to get ahead of these trends and start improving your contract and vendor management approach, book a call with our experts to see how Gatekeeper can help.