Cutting costs? Here’s some good news: Many legal agreements have more "wiggle room" than non-legal employees may suspect. Finding those cost-saving and revenue-boosting opportunities are some of the best services a legal team can provide during difficult economic conditions.
By taking a comprehensive audit of your company’s contracts, your finance and legal teams can join forces to cut costs without cutting employee headcount. This two-part blog series will outline contract management steps you can take to improve your bottom line, especially during crises (like a global pandemic).
1. Quantify Force Majeure
Legal teams should examine force majeure clauses -- the common contract language that adjusts legal obligations and financial options in unforeseeable events, such as a global pandemic. This is where most "emergency" contract analysis begins and ends because it can nullify contractually guaranteed revenue and eliminate contractually obligated costs.
Find every one of your contracts that includes a force majeure clause and determine exactly how any invocation of that clause affects your cash flow. Outside force majeure, there are a number of other contract clauses and components that can help you lock in revenue or eliminate costs.
2. Evaluate Vendor Agreements
Having full visibility into your vendor agreements can help you know when existing vendor agreements automatically renew and/or offer no-penalty cancellation with sufficient notice. By examining your vendor contracts in detail, you can make an informed decision to cancel, extend, and/or renegotiate a new payment structure with any supplier or service provider.
3. Clarify IT Department Contract Obligations and Priorities
Your IT department has a comprehensive list of procedures for protecting and repairing your software and data after a system failure or security breach -- but do those procedures match up with your contractual obligations to your clients? If not, your company could be racking up a lot of unnecessary expenses -- ones the legal team could help you avoid.
Service Level Agreements w/ outage compensation
Your legal team should provide IT with a list of these cases, so they can properly prioritize repairs during a mass outage and avoid unnecessary client payouts.
Terms of Service or Privacy Policies that require notification of a data breach within a specific time frame
Helping IT handle system failures in a contract-conscious manner saves money. If particular clients are due compensation or can summarily terminate an agreement if they receive late notice of a data breach, those clients should be the first ones notified of a cyberattack.
Next week, we’ll be back with part two in this series, including more contract management best practices to help your team save money. Can’t wait? Download the full guide here.
