In order to adhere to compliance requirements and prevent resulting financial losses such as contractual penalties, loss of sales or claims for damages, all agreements need to be checked and monitored on an ongoing basis. However, with the increasing number and complexity of regulations, this is often not easy to achieve manually. To avoid losing track, companies are well advised to digitize their processes. Recent developments such as the German LkSG (Lieferkettensorgfaltspflichtengesetz), the new EU regulation DORA (Digital Operational Resilience Act) in the financial sector or the already well-known DSGV further reinforce this necessity.

But how exactly does modern, digital contract management help companies to speed up their processes while complying with existing due diligence obligations?

Bundle contract-relevant information in one place

The author: Robin Schmeisser, Managing Director of Fabasoft Contracts

© Fabasoft

To keep all information manageable, companies need to create a single point of truth (SPOT) with a digital contract archive. This stores all documents in an audit-proof manner. The SPOT forms the basis for managing both the existing contract portfolio and the future creation of agreements in compliance with regulations. When new contracts are created, the individual metadata for each business case is automatically added to the document after being entered directly into the digital contract file. In addition, the use of contract templates and clause libraries ensures that all necessary and currently valid specifications are taken into account. The templates are set up by the legal experts in advance and changes to the text passages are only made by the authorized persons in the respective context. This not only reduces manual effort, but also minimizes the risk of errors.

Establishing digital business processes

In order to reliably comply with legal and organizational requirements such as test steps, risk assessments or approval guidelines, structured digital processes are required. This means that all departments that need to be involved in accordance with compliance regulations (including Legal, Purchasing or other areas) are demonstrably included in the workflows. How the process runs depends on the respective business case: For example, using the dual-control principle from a certain contract amount or with the help of the CISO's (Chief Information Security Officers) involvement in software decisions.

Digital workflows are also used in supplier management: these enable demonstrably careful sourcing of new suppliers. For example, in the form of a controlled security check for providers of critical IT services (DORA) or an automated reminder of expiring certificates and certificates that need to be renewed (LkSG). Once the agreements have been successfully generated, the signing process is fast, secure and traceable thanks to electronic signatures.

Create automated reporting

For ongoing contracts, companies need to carry out regular monitoring and reporting in order to maintain an overview of compliance risks. If all relevant information is already stored in the digital file in advance, this can be done at the touch of a button. The use of automated evaluations is particularly useful when companies are subject to reporting obligations - for example in data processing - or for annual and ad hoc audits.

In addition, risk evaluations or other reports can be shared with the supervisory authorities easily and without media discontinuity by using the "external area" of Fabasoft Contracts. All internal and external parties have access to the documents stored in password-protected data rooms, which never leave the secure cloud.

The benefits of contract management software

Compliance requirements define uniform procedures and rules that serve to protect companies and their stakeholders. If companies behave in a compliant manner, they minimize legal and economic risks on the one hand and strengthen their customer relationships in the long term on the other. Contract management software helps them to monitor new and ongoing agreements and thus fulfill their due diligence obligations at all times. By defining the right digital processes, this can be done quickly, efficiently and in an audit-proof manner.