- 15 min read
- KANTI PRABHA
Introduction
To paraphrase Heraclitus, change is the only constant. I’m sure the ancient Greek philosopher didn’t particularly say this in the context of business, but it is just as applicable. None of us could have predicted that a flu-like virus that was first discovered in China less than six months ago is currently upending everything – from the way we work and play to how we interact with each other. Social distancing is the new normal.
The COVID-19 pandemic isn’t something businesses were prepared to handle and some of them are still coping with the massive changes that are emerging around them every day. Just look at the headlines! Nations are closing their borders, implementing bans on local and international travel, and enforcing curfews to flatten the curve. The crisis is affecting everyone and every business equally.
Staying Ahead of the Curve
But what about critical service providers who form the backbone of modern society? What about banks, healthcare providers, and manufacturers of essential commodities? How are they going to cope with a new reality that is constantly in a state of flux? If a manufacturer’s strategic supplier partner is based out of Italy, how and how fast will they be able to find alternatives and change over? What are the obligations that need to be met immediately and which ones can be pushed back until the situation improves? Are deliveries likely to be on point or are there going to be pricing and payment term changes?
The answers to these questions as well as the solution to eventual roadblocks triggered by this crisis are hidden in supplier contracts.
A buyer-supplier contract is a multifaceted, multidimensional package of interlinked documents that define the entire business relationship. They are pretty much ironclad and when it’s business as usual, you don’t need to suddenly pull them up, review them, and amend them too often. The COVID-19 crisis is a whole new ballgame – the situation is evolving rapidly and the only way you can keep your business ahead of the curve is by aligning your commercial contracting practice to the speed of change.
Incorporating contract changes can be a time-consuming affair. Making any change entails reviewing all in-scope contracts to determine the right transition path as well as obligations and tasks affected downstream. Doing it manually means that you will be burdening the already burdened finance, legal and operations teams, which are working round the clock to keep a business running during difficult times.
Changing Contracts at the Speed of Change
Now the next logical step would be to resort to a CLM solution and use it to make the changes, but it might not be up to the task of implementing a specific change across an entire contract package (including linked obligations, service levels, payments, etc.) with a single click.
With Sirion however, you can get ahead of the curve.
First and foremost, Sirion’s COVID Response Dashboard will let you get a quick snapshot of your global contract relationships so that you can visually analyze which of your suppliers are operating out of COVID-impacted regions. This, in turn, gives you a clear picture of which suppliers are likely to have difficulty meeting their contractual obligations and SLs.
COVID-19 Response Dashboard
Here, we are looking at a map of the assumable disruption that your supply chain is likely experiencing at this point. How do you figure out a way to cope with the predicted fallout? First things first – you drill down into the data, deep dive and discover which critical service levels and deliveries your suppliers will probably not be able to fulfill. Based on this intel, you should prioritize contract changes to mitigate the impact. Sirion’s change management system simplifies the process of negotiating, reviewing, and approving SL and obligation changes to push back deadlines, revise payment terms, delivery quantities and billing periods to mitigate current and possible losses that could occur because of impacted suppliers.
More importantly, it is critical to identify which of your contracts include force majeure, BCP and other similar clauses to mitigate risks associated with unprecedented situations such as the COVID crisis. The contracts that do not include these clauses can be pinpointed using AI-led legal language analysis and can then be amended using the change request process.
This brings us to the next subject at hand: what industry best practices can we request suppliers to implement if we, as service consumers, want to continue operating as usual under stressful conditions. We’ll be talking about these best practice-based contract changes and more in our next post, so keep checking in with us.
Additional Resources
Contracts and Obligations – No wonder marriage is a tricky subject-DEMO
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