Navigate geopolitical disruptions with contract intelligence

Procurement Magazine takes a look at Icertis’ insights on the benefits of contract intelligence in navigating times of geopolitical disruption

In response to Russia’s invasion of Ukraine governments around the world are imposing severe sanctions against Russia. 

For an organisation to stay compliant in a situation such as this, it is important to have an understanding of all contracts involved in an organisation's operations, as well as how they are impacted from a regulatory, reputational, and ethical standpoint. 

“Some of these efforts will be more effective than others. Depending on how mature an organisation is in its digital transformation journey, the process of identifying Russian ties in its business network may range from quick and painless to difficult and incomplete,” said Icertis.

The company added: “The most effective efforts will include a review of structured and connected contract data. Why contract data? Because contracts are the bedrock of who a company does business with and on what terms. Companies that have digitized these powerful documents and centralised their data in a repository enjoy a single source for who their suppliers are, who the customers are, and what rights and commitments each relationship carries. They can also act quickly to terminate existing contracts and stay agile and compliant with regulations while executing new ones.”

First order of business in navigating geopolitical disruptions 

Identify any impacted agreements

Having all agreements in a central location with useful headquarters metadata, allows organisations to run AI-assisted searches to gain insight into the affected agreements.

Identify potential actions 

Once identified it's important to identify the risks associated and the potential impact of those risks. It is at the point where an organisation will need to look at the process and rights for ending an agreement. 

“Once again, [similar to] the early days of COVID, companies are reviewing contracts specifically for their force majeure provisions; technology like AI-enabled CLM allows companies to do this quickly and confidently. Once the force majeure clauses are surfaced, analysis can begin to determine whether current events fit the force majeure definition,” explained Icertis.

Termination of affected agreements

For those affected, an organisation must ensure they are in compliance with the notification processes and produce a single view of contract statuses. 

Long term steps to navigate geopolitical disruptions

Backfill contractual relationships

Termination of agreements are likely to affect procurement and supply chains different, however contract management solutions harnessing contract intelligence can mitigate the impact for organisations. 

Ivalua explained that such solutions can help companies to “respond to supply chain issues raised by terminated contracts by identifying other suppliers already under contract who can provide the same services or goods.”

Should a supplier already under contract not exist, “digital contracting systems can accelerate the onboarding of a new supplier through automation, so disruption is minimised,” added Ivalua.

Prohibit new business with those under sanctions

It is important for organisations to set up controls to prohibit new contracts with those under sanctions in order to ensure compliance. 

Ivalua commented that by integrating third-party systems that can help check for those under sanctions an organisation can ensure that their compliance is an ongoing corporate posture.

Update supplier policies

Organisations can also future proof their compliance by updating their boilerplate contracts on their stance on any imposed sanctions. 

Ivalua commented: “For example, procurement can ensure that clauses giving them the right to immediate termination if a supplier violates sanctions are included. More stringent language can require warranties and certifications that all sourced material abides by agreed-upon standards.”

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