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What are the most common contract management mistakes that increase risk?

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Contract management is the process of planning, executing, and monitoring the performance of contracts throughout their lifecycle. It involves ensuring that the terms and conditions of the contract are met, the risks are minimized, and the benefits are maximized. However, many organizations make common contract management mistakes that increase risk and expose them to legal, financial, and reputational damage. Here are some of the most frequent errors and how to avoid them.

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1 Poor contract visibility

One of the biggest contract management mistakes is not having a centralized and accessible system for storing, tracking, and updating contracts. This can lead to missed deadlines, lost opportunities, duplicate contracts, and non-compliance issues. To avoid this, you need to have a contract management software that allows you to store all your contracts in one place, assign roles and responsibilities, set alerts and reminders, and generate reports and analytics. This way, you can have a clear overview of your contract portfolio and its performance.

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Anthony Werner

Analytics and Insights for Payer Relations
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One of the most frequent mistakes with contract management is lack of a contract review or an insufficient level of review. Another big issue is lack of data and preparation prior to reviewing a contract. There is a need to understand where an organization is susceptible to risks. There is a need to manage contracts and lack of systems or process will create less optimal results. A third weakness in contract management is lack of a consistent strategy for contracting. What is the organization's Value Proposition? Which risks are acceptable and which are unacceptable?

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2 Inadequate risk assessment

Another common contract management mistake is not conducting a thorough risk assessment before signing or renewing a contract. This can expose you to unforeseen liabilities, disputes, and penalties. To avoid this, you need to identify and evaluate the potential risks associated with each contract, such as legal, financial, operational, and strategic risks. You also need to define the risk appetite, tolerance, and mitigation strategies for each contract. This way, you can anticipate and manage the risks and ensure that the contract aligns with your objectives and expectations.

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3 Insufficient contract review

A third frequent contract management mistake is not reviewing the contract carefully before signing or after execution. This can result in errors, omissions, ambiguities, and inconsistencies that can cause confusion, conflict, and litigation. To avoid this, you need to have a contract review process that involves multiple stakeholders, such as legal, financial, and operational experts. You also need to use tools and techniques that can help you review the contract more efficiently and accurately, such as checklists, templates, and artificial intelligence. This way, you can ensure that the contract is clear, complete, and compliant.

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4 Lack of contract optimization

A fourth common contract management mistake is not optimizing the contract for maximum value and performance. This can result in missed opportunities, wasted resources, and poor outcomes. To avoid this, you need to have a contract optimization process that involves monitoring the contract performance, measuring the key performance indicators, and identifying the areas for improvement. You also need to have a contract negotiation process that involves communicating effectively, resolving issues, and seeking mutually beneficial solutions. This way, you can ensure that the contract delivers the best results for both parties.

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5 Ineffective contract closure

A fifth frequent contract management mistake is not closing the contract properly after completion or termination. This can result in unresolved obligations, disputes, and losses. To avoid this, you need to have a contract closure process that involves verifying the fulfillment of the contract terms, documenting the lessons learned, and archiving the contract records. You also need to have a contract renewal process that involves evaluating the contract performance, assessing the relationship, and deciding whether to renew or end the contract. This way, you can ensure that the contract is closed smoothly and successfully.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Contract Negotiation

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What are the most common contract management mistakes that increase risk?

1

2

3

4

5

6

1 Poor contract visibility

2 Inadequate risk assessment

3 Insufficient contract review

4 Lack of contract optimization

5 Ineffective contract closure

6 Here’s what else to consider

Contract Negotiation

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What are the most common contract management mistakes that increase risk?

1

2

3

4

5

6

1 Poor contract visibility

2 Inadequate risk assessment

3 Insufficient contract review

4 Lack of contract optimization

5 Ineffective contract closure

6 Here’s what else to consider

Contract Negotiation

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