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London, May 13 2021 /PRNewswire/-According to the new Ernst & Young Law and data from the Harvard Law School Legal Career Center, more than half of the large companies surveyed around the world face loss of revenue and lost business opportunities due to inefficient contract processing.
That report- How does the complexity of the contract hide the obvious profitability? – It is the second survey in a series of three surveys, which explores the legal opportunities and challenges faced by global organizations. It includes the views of 1,000 contracting professionals and leaders from global legal departments, procurement, business contracting and business development departments.
More than half of business development leaders (57%) stated that their organization’s revenue has fallen due to inefficient contracts, while 50% of their business has been missed.
Although the majority of organizations surveyed (92%) are trying to change the way contracts are handled, most respondents are struggling when facing major obstacles. Almost all organizations (98%) said they faced serious obstacles, while 38% said they had tried to change and failed.
Kate ButtonEY Global Tax Vice Chairman said:
“Revenue growth is the basic goal of any business organization, and an effective contract process plays a vital role in achieving this goal. Contract teams all over the world know the value they can bring, and they are making a transition. It’s a real effort, but the survey has made people more aware of income. Focus on solving the obstacles they must overcome to achieve their goals.”
Pressure to cut costs
One of the main drivers of change in contracting professionals is the pressure to cut costs. Almost all organizations (99%) plan to reduce contracting costs in the next two years. The scale of their plans is also staggering, with one-third of large organizations hoping to reduce contract costs by 30% or more.
Lack of clarity in decision making
Another basic challenge faced by many interviewees is that despite a broad consensus on change requirements, many people are still confused about the true location of contract management responsibilities, which can complicate the contract process and transformation efforts. 59% of the legal department believes that they play a leadership role, while a similar proportion (56%) of contractors believe that they are responsible. At the same time, 39% of business development professionals consider them to be decision makers.
Technology gap
Although most organizations (70%) have a formal contract technology strategy, almost all organizations (99%) stated that they do not have the data and technology needed to optimize the contract process. As a result, there is a gap between strategy and execution, and many organizations face greater risks due to the inability to measure, manage, and control compliance with their policies.
Organizations are also working hard to deploy the technology in place. Almost half (47%) of the respondents indicated that implementation is a major challenge, and about a third (34%) of the respondents indicated that it is difficult to recruit people with the skills required to identify and implement the required technology.
Weak contract process
The survey revealed that there are astonishing gaps in the contract management process. 69% of organizations do not require employees to use templates when drafting contracts, while the same percentage of organizations do not require compliance with any rules or guidelines.
Nearly half (49%) said they lack a definite contract storage process after execution, while almost eight in ten (78%) said they did not systematically monitor contract obligations. In addition, almost three-quarters (71%) of contracts are not monitored to check for deviations from standard terms.
John KnoxThe head of Ernst & Young’s global legal custody service said:
“The importance of obtaining contract rights cannot be underestimated. For many organizations, this is a’fatal weakness’, but with the right transformation around people, processes, and technology, contracts can actually become business drivers and make a difference. The survey shows that one way organizations aim to solve these challenges is to work with subject owners and external providers. Such joint procurement arrangements can help clarify responsibilities, centralize processes and ensure that the right work is aligned with the right resources. You can focus on more strategic activities.”
David Wilkins, Lester Kissel Professor of Law, Associate Dean of the Global Legal Profession Initiative, Faculty Director of the Legal Profession Center, Harvard Law School,Say:
“Contracts are at the core of every business. Contracts determine how growth occurs and how risks are managed. Therefore, it is vital that organizations have effective systems and processes to manage all aspects of the contract process, from negotiation and execution to termination or Termination, renewal, and an accurate understanding of the obligations, benefits, and risks within the scope of the contract, but, as the survey emphasizes, the fact that so many functions are interested in or responsible for the contract makes it difficult for us to most The company will effectively manage contracts. As we enter a period of accelerated growth and risk, business leaders must find new ways to balance these internal interests and manage future contracting functions.”
To learn more about the 2021 Ernst & Young Legal Investigation, please visit ey.com/law.
About Ernst & Young
Ernst & Young’s existence is to build a better working environment, help create long-term value for customers, people and society, and build trust in the capital market.
With the support of data and technology, the Ernst & Young team in more than 150 countries/regions guarantees to provide trust and help customers grow, transform and operate.
The Ernst & Young team works in the fields of assurance, consulting, law, strategy, taxation and transactions, asking better questions and finding new answers to the complex problems facing the world today.
Ernst & Young is a global organization, and it may also be one or more of the member companies of Ernst & Young Global Limited. Each member company is an independent legal entity. Ernst & Young Global Limited, a British limited liability company, does not provide services to customers. Information about how EY collects and uses personal data, as well as a description of the rights that individuals have under data protection laws, can be obtained through ey.com/privacy. Where prohibited by local law, Ernst & Young member firms do not enforce the law. For more information about our organization, please visit ey.com.
This press release is issued by EYGM Limited, which is a member of the global Ernst & Young organization, which does not provide any services to customers.
About the survey
The survey summarized the opinions of the head of the legal department and the procurement, commercial contracts, business development and legal entity management teams.
The result is a series of reports by Ernst & Young and the Legal Career Center of Harvard Law School that explore the challenges faced by legal departments around the world.
The survey is part of the 2021 Ernst & Young CEO’s imperative series, which provides important answers and actions to help the general counsel reshape the future of his organization. For more insights on this series, please visit ey.com.
About Harvard Law School Legal Career Center
The Legal Career Center is a research institution dedicated to providing a richer understanding of the rapidly changing global legal profession. To this end, we conduct, sponsor and publish world-class research related to the legal profession; innovate and implement new methods and content to teach law students and practicing lawyers; and promote a broader and deeper relationship between legal practitioners and academia Link. To learn more about the center, please visit: https://clp.law.harvard.edu/
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