Solid contracts serve as an organization's foundation. Concrete contracts establish how a
business behaves and so define its existence, from managing staff and adhering to government
requirements to trading with vendors or purchasers.
Contracts seldom stay frozen indefinitely because of their very nature. Numerous
stakeholders subject contracts to several phases while transactions take place, including
initiation, negotiation, approval, signature, performance, and renewal. Contract management
is the process of officially defining all the actions taken during various transactional
phases, assuring proper ownership of contracts, and overseeing and managing them.
The dynamic character of the sector, coupled with its dispersed activities and extensive operations, distinguishes its contract management system. This is how:
➔ A large amount of documentation involved in contract preparation
The enormous amount of documents that need to be reviewed while creating contracts typically
leaves the sector feeling overburdened. Executives find it difficult to extract and
interpret relevant information from paperwork since there are many parties involved,
including consumers, regulators, and vendors.
➔ Searchability and visibility
Executives that deal with customers typically have to organise documents for account
maintenance, loans, insurance, and credit history. The demand for effective contract
management systems that can swiftly recover contracts increases as a result.
➔ Due diligence based on risk
In this business, risk assessment and management are highly prioritised in all
decision-making processes, from loan approval to determining insurance rates. Contractual
conditions are set by the history of the customer and are then modified in response to the
performance of the borrower or the occurrence of certain life events for an insured person.
Executives build all necessary parameters into their contract management procedures as a
result, managing risk in the process.
➔ Third-party tracking
BFSI organisations frequently work with outside contractors to cut costs and make the most
of their expertise. Additionally, central banks like the RBI require businesses to follow
their outsourcing regulations. Consequently, a key component of contract management in this
industry is keeping an eye on the performance of outside vendors.
➔ Authorization and approval
Executives demand that contract management procedures adhere to the organisational
hierarchy. For instance, the branch manager of a bank will be able to sign a loan agreement
up to a particular amount but not one to purchase banking solution software. Therefore,
contract management must make sure that only the right contract is provided to the
appropriate party.
➔ Reporting
In order to raise a red flag in the event of a contract's terms and duties not being met,
organisations need contract management solutions. In addition, contracts with expiration
dates, such as leases, call for systems to notify the administrators of the procedure for
renewal and expiration. Not doing so would likely result in a loss of business as well as
damage to one's reputation and relationships with customers.
Get on top of your Contracts
In order to overcome the limitations of traditional means, BFSI businesses must use cutting-edge contract management solutions. For businesses, becoming digital is a crucial step in converting contracts into valuable assets. Players must be proactive rather than reactive when it comes to managing contracts as the sector experiences improved internet speeds and growing internet use. Not only will this make it easier to serve clients in the future, but it will also make it easier to adapt to the fast-changing regulatory environment.
