We recently sat down with Osama Hussain, General Counsel at the Irdeto Group, on The Contract Heroes Podcast. In our discussion we talked about many things, with a focus around:
- Establishing relationships across the organization.
- Understanding your business and what’s driving its revenue.
- Defining expectations with top management.
- Identifying the necessary components of your agreements.
- Using advisors and tools to make everyone’s lives easier.
Why should Professionals Pay Attention to Contract Management Processes?
Companies have the aim to generate value for their shareholders, and they can’t do that without preserving cash flows, protecting assets, and engaging within their markets. And legal departments in most companies play a crucial role in this.
Legal departments do this by owning the contract management program for the company. However, in many cases, you get to the contract management phase at the end of the transaction. And usually, you hear about slow contracting processes from in-house teams and uncertainty about who is responsible for certain aspects of the process.
Plus, there is a lack of ownership when issues arise. And this is what happens; in the end, when these problems fester, and you don’t address them adequately, oftentimes, companies hastily adopt tools, hoping that these tools will automatically fix all their problems. However, that does not happen, and in fact, it leads to more frustration, and people badmouth tools because these tools did not fix the problem.
In many cases, this happens because most organizations treat contracting as an afterthought, which is problematic. This is why it is essential to ask ourselves why a contract management tool is not considered from the outset, as it is fundamental to a company’s operation.
Who is Responsible for Setting up a Corporate Contracting Program?
In Osama’s opinion, legal departments should be responsible for setting up a corporate contracting program. This is because, when it comes to contract management, legal professionals are the smartest people in an organization. Also, note that the legal team knows how to run the program. This is because they are trained and experienced in contracting. For example, they have the education and relevant degrees.
Also, it is the only department in most organizations that has access to all aspects of the business that are relevant in this case.
Have You been Part of the Contracting Process in the Organizations You’ve Worked or Was a Process in Place when You Started?
Osama was often put into an environment where he needed to put a process in place. Often it was being thought of as an afterthought, which is concerning. And Osama thinks that it is the wrong way to go about it. This is because it usually leads to two outcomes.
One is where negotiations go on for long and became hostile. The second outcome is that companies usually end up agreeing to a transaction that did not capture the risk profile that they wanted to or the benefits they hope to achieve.
Where to Start when Developing a Contract Management Program?
According to Osama, there are five crucial components in setting up any contracting program. And the first component is establishing relationships across your organization. The second step entails understanding your business, including your products, services, and solutions. In other words, what is driving your company’s revenues?
The third component involves defining your expectations to top management preemptively, and fourth is to build the necessary components of your agreement. And lastly, you should have your advisors and tools ready to make everyone’s lives simpler.
Osama also thinks that it is vital to build strong relationships with a number of individuals within the commercial entity, such as finance, business development, and sales professionals.
What about Automating NDAs?
Osama thinks that you should automate any agreement that you can. This is especially true for NDAs because you don’t need much negotiation after you have developed a template that is pretty reasonable.
Is There a Need for More Collaboration between Sales and Legal Teams?
Osama thinks that it is important to build meaningful and established relationships across the business. If you don’t develop these relationships, it is very difficult to set up and benefit from a successful contractual program.
How to Define Expectations to Top Management?
Osama thinks that, in many cases, limitation of liability is what most people think of when communication with top management. People wonder what they will talk to top management about when setting expectations. However, it is important to keep in mind that risk management does not start with the limitation of liability; instead, it ends there.
This is why you have to identify all the things that need to be in your agreements with respect to mitigating risk in a way that limitation of liability is the backstop.
System Features that can Facilitate Negotiations
To answer this question, it is crucial to consider your workflows and who is ultimately making the decision on the playbook clauses and their selection. And this will eventually define what you finally implement within the system.
And the job of in-house contract program managers is to empower the business. He thinks that if you set up a program that is part and parcel of what is appropriate for your company, it is crucial to understand what the workflow should be and what everyone in your company is comfortable with, and this is why it is important to engage all the stakeholders.
When looking from the perspective of transaction closure, it is also important to negotiate with your internal teams.