Inflation has hit multi-decade highs across the globe with the US CPI index rising over 8.3% in the last 12 months. Despite the continuous moderation of federal governments to curb inflation, commodity prices have skyrocketed and companies are facing the brunt of it. Companies are pulling multiple levers to manage margins eroded by rising oil and commodity prices, supply shortages, and higher wages.
According to EY CEO Outlook Pulse, CEOs across the globe see inflation as a critical risk with the majority of respondents (69%) predicting it will negatively impact their company’s performance and growth.
However, in the midst of all this chaos companies are still prioritizing digital transformation to improve productivity and stay competitive with their peers. 60% of executives say digital transformation is their most critical growth driver in 2023.
More and more companies are turning to their contracts to stay on top of inflation. Drafting water-tight contracts are key for businesses to defend themselves from the worst effects of inflation by building in proper protectionary language and clauses in their agreements.
Contracts are key to combating inflation
Buy-side contracts are hypersensitive to inflationary pressures as rising raw material costs are likely to eat into profits. To stay on top of all these risks, companies should use smart Contract Lifecycle Management(CLM) tools to aid them draft contracts with clauses and terms that help them curb price adjustments(level of price changes and frequency).
On top of drafting strong contracts, companies should have a centralized dashboard to keep track of their obligations and have complete visibility into all their agreement terms. Without proper transparency and clarity into their contracts, companies are at risk of price shifts and will struggle to efficiently manage inflation.
Inflation is one of the most critical concerns of a business, hence drafting contracts with favorable terms and obligations is imperative for corporations to stay risk-free. Identifying risk before it leads to spend leakage can help companies maintain their profit margins in times of multi-year high inflation.
Maintain complete control over all your contracts
Creating transparency to risk and prioritization is key to an effective inflation protection program. Capturing all the terms and obligations present in your contracts including those most impacted by inflation is a must for all companies.
Organizations must be aware of the risks in their agreements and make plans to mitigate those risks. A smart Contract Lifecycle Management(CLM) tool with AI capabilities alerts users for clauses that might be deemed risky, allowing you to replace these existing risky clauses across all agreements in the company, shielding you from unnecessary costs, and driving organization-wide compliance. No matter the length of the contract or the industry, Volody’s CLM tool can detect risky clauses and inform you of any associated risk, making sure that you are never hit with any surprises.
Post signature, companies can delegate specific obligations to individuals who are responsible to fulfil them. Intelligent CLM solutions have in-built reminder features that ensure you never miss out on any time-sensitive terms or renewals.
Having visibility into all your contracts, allows companies to have a better picture of the state of their contracts and where every dollar is going. Without complete control, organizations often miss out on key renewals and can lose up to 9% of their annual revenue.
New-age problems require sophisticated digital solutions
In this new digital-first world, companies are struggling to keep track of all their contracts physically, often unable to draft water-tight contracts with the limited resources available.
Volody recently helped one of the largest telecom providers in the world digitize all their contracts and delivered ROI in the first year itself. Being a multinational telecom provider, they were most likely to be affected by inflation as they were bombarded with extensive contracts with numerous clauses and terms. With a click of a button, our tool scanned through more than 20,000 agreements, alerting them for any risky clauses (E.g Unlimited liability, price changes), saving them hours of tedious manual work. Through our tool, our client was able to stay on top of any price changes due to inflation and ensure organization-wide compliance.