A recent edition of Raconteur included an interesting article about the growing understanding of the value of contract management and the role FTI Consulting plays in that. The need to be on top of a company’s contractual obligations, and the obligations owed to it by others, is something which looks both backwards and into the future. Many organisations have very many – sometimes tens of thousands of – contracts which have historically not been subject to any form of central control. No one part of the organisation knows what these contracts are or where they are, still less what they say.
It becomes increasingly important to know and understand what lies in these contracts, both the risk and the hidden value. It is necessary not only to grasp what exists already but also to manage properly future contracts. The skills and technology developed by FTI for handling eDiscovery exercises is well tuned for application to the management of contracts.
Kathryn Hardie is Senior Managing Director and Global Contract Intelligence (CI) leader of FTI Consulting. She draws attention to the need for companies to understand the existing commitments of target companies in major acquisitions business, identifying overlaps and inconsistencies as well as risks and benefits. She says:
in merger transactions there is a particular urgency for corporations to understand the nature of the targeted company’s contracts to assess their obligations. Entering into an integrated company requires that acquired contractual terms not only be understood but adhered to in ongoing business practice.
The pending General Data Protection Regulation gives a very sharp focus to the need to understand the data in a company’s contractual and other documents. Brexit raises other issues, particularly where contracts may have been drawn on an assumption that the EU continues to exist in its present form and that the UK is part of it.
Senior managing director Craig Earnshaw says:
Organisations need to be aware of their contract terms about geographical and territorial issues. For example, they could be the sole distributor of goods or services in the EU, with a potential requirement to renegotiate the contract to determine whether this includes or excludes the UK post-Brexit.
Once the UK is no longer part of the EU, there may be new trade barriers or new taxes and levies. Companies therefore need to understand whether their current contracts provide for these situations as they might become uncommercial and require renegotiation.”
In circumstances where no one (including the UK government or the EU) has any idea what the final shape will be of the post-Brexit landscape, two years seems a very short time even to identify existing and potential contracts, let alone manage them. Services such as those offered by FTI will be essential for many.