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Tackling risk – why visibility into contracts is crucial for procurement pros

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Tackling risk - why visibility into contracts is crucial for procurement pros

By Christina Wojcik

Risk is a topic of pervasive and growing concern in supply and sourcing management.

Procurement itself is no longer just about acquiring products and services for the best price and controlling expenses.

Instead, purchasing and supply professionals are under tremendous pressure to drive out costs and ensure that procurement strategy is in line with wider business objectives, including how personally identifiable information is handled.

That scrutiny means that the procurement function is often the external face of an organization, especially today’s competitive enterprise, acting as an early-detection system for spotting anything that might represent a financial legal, or reputational risk. As a result, they are not only tasked with, but also relied upon, to give executives the analytics and guidance they need to make better business decisions. It means also that they are a crucial player in understanding and revealing legal and regulatory exposure, while providing stakeholders with useful intelligence for achieving broader strategic goals.

The fact is, access to more and better information changes how we think about and act upon that reconnaissance. While a procurement team’s performance, alongside their suppliers, can have a major impact on the revenue and profitability of any business, effective procurement and with it, better risk management, requires the right technology.

The enterprise can positively change how it manages exposure throughout the procurement lifecycle based on contract analysis, and by managing and optimizing the supply base through the aggregation of suppliers and their contracts into a single system, 360-degree view into supplier information, capabilities, risk and performance can be created.

 Contract analysis as opportunity

Generally, when we think about risk management in the enterprise, the accepted school of thought would be how to control it.

But what if we instead looked to properly identify risk as a tactic for finding more revenue? The most powerful thing is to see how risk translates into lost revenue, or perhaps more importantly, new-found revenue opportunities.

There is a lot of talk about the seismic changes that AI will bring, and the prospects for self-driving cars, home robots, and all manner of time and labor-saving applications are truly staggering. However, it is the more prosaic application of AI through text analytics (enabled by the marriage of machine learning and natural language processing) that is driving the most successful applications of AI in business right now.

Contract management and analysis has emerged as, perhaps, the most important shift in the work undertaken by commercial and procurement teams in a modern business. Historically, manual contract review took months or even years to complete, if it was done at all. The new demands placed on procurement and supply management teams requires that they look to technology to automate the process.

Contract analytics, which is most effectively being driven by the application of machine learning-based decision-science and AI, has become central to efficient contract servicing and risk management. In short, data sophistication is now essential to competitive excellence, but more importantly should be central to how risk is identified as a strategy towards profitability.

A better view of the heat map

Christina Wojcik

Christina Wojcik

Imagine a heat map of your organization that points out where different liabilities exist and indicates the risk level of each of these liabilities. This is analogous to the application of advanced analytics to contracts within the enterprise, where the identification of non-standard language or clauses, and how far they deviate from the standard, are a primary objective. This requires far more than a static database with reporting capabilities–it demands accurate, dynamic, real-time intelligence that can only be derived from AI-driven methodologies.

A clear view of your contracts will not only provide you with the analytics and guidance needed to make better business decisions, but also better manage management.  Contract analytics and discovery systems can uncover hidden opportunities to rationalize suppliers, negotiate better deals, and take advantage of incentives.

 Every organization has their own appetite for risk. Assessing a company’s risk profile is the first step toward applying right-fit contract analytics that give a view of contracts at scale and provide a ‘heat map’ of potential risk exposure. Without this assessment, it is hard to take a holistic view of the entire contract corpus, and with it a comprehensive understanding of, for example, service-level agreements and uptimes, non-standard conditions and terms, and whether or not liabilities are covered by insurance.

Considering that IACCM figures indicate that businesses typically waste between 4 percent and 9 percent of total spend, the result of applying contract analysis to the procurement and supply management process is sobering. A company with an annual spend of $1 billion, based on the lower end of IACCM’s estimates, is losing $40 million. Should the procurement team successfully identify half of that loss, and just 50 percent of that figure is actually recoverable, it translates into a potential savings of $10 million.

In particular, contract analysis has been used by the enterprise in a powerful way for non-standard clause detection. Non-standard contracts constrain organizations under the best of circumstances. Vague or complex contract language, on which an organization can base many key business decisions, is a central factor in choosing between alternative courses of action. This ‘what if’ evaluation of risk, is always viewed by supply and procurement professionals as an aspect of business operations that must be properly managed within a tolerable range. This contribution to the resilience of the overall procurement process also ensures smooth and more predictable financial performance.

On the M&A side, for instance, the challenges and opportunities can be enormous. When an enterprise subsumes a smaller player, it may sample and review a set of contracts during the due diligence phase to assess obligations and risk exposure. Manual reviews or analysis using insufficient technologies, such as archaic contract lifecycle management systems that were never meant for this task, typically sample just a fraction of the overall contract portfolio–and thereby just a fraction of the overall risk–the organization could inherit through the deal.

Monitoring and managing risk is costly

Real and powerful insight can only be extrapolated from data at scale. But still, the point is not simply to mechanically extract as much data as possible from the contract corpus, but to apply it in the context of the business so that heat maps of risk are tailored to the risk assessment itself.

Better risk management of buy-side and sell-side contracts, and other legal agreements such as NDAs and leases, requires that the analysis tools are able to learn an organization’s specific languages and clauses, and can be trained to search for specific elements, regulatory issues, and, yes, even non-standard clauses. This can only be achieved through machine learning techniques in AI.

 When that risk consumes mission-critical resources, the cost is even higher yet too many organizations remain unaware of the value that contract analysis can bring to the procurement process. That’s why risk management must be well-understood by procurement teams, in particular, including a clear view of the technologies that can be implemented with minimum cost and high impact. With the application of AI to contract analysis, exposure to risk can be minimized and the impact of a potentially catastrophic event can often be avoided altogether.

It can be said that risk assessment by supply and sourcing management professionals requires that they first recognize and understand not the actual exposure itself, but the methods that can be used to avoid problems. Systematically anticipating what might occur in the future and thwarting fires before they start is possible when the approach to risk management makes contract analytics, drawing on artificial intelligence, a part of everyday business and as integral to procurement as any other process.

About the author

Christina Wojcik is Seal Software’s Vice President Legal Services

Christina leads the technical and legal solution consultant organization, globally, at Seal Software. As VP of Solution Consulting, she focuses on ensuring that her team provides prospective clients robust solutions to meet their complex contract discovery and analytics needs. Prior to joining Seal, Christina was the Practice Executive, Contract Management at IBM.  She was responsible for Contract Management Strategy & Best Practices. She worked closely with Fortune 500 companies to replace high-risk, manually-intensive contract management processes with proven, scalable technology that delivers complete risk oversight and obligation management to legal organizations, while streamlining the end-to-end process, thereby increasing revenue and reducing costs. Christina also worked with alliance partners to create innovative solutions that provide a robust legal technology offering.

https://www.seal-software.com/

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Half of UK’s finance sector confirms diversity should be more of a priority in the workplace, with calls for action across the industry

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Half of UK’s finance sector confirms diversity should be more of a priority in the workplace, with calls for action across the industry 1

Almost half (45%) of Britain’s banking/financial services workforce think their employer could do more when it comes to diversity, according to a report from UK-based tech-for-good developer, Culture Shift.

Despite 74% of employees in the sector confirming that working somewhere with a diverse workforce is an important factor for their happiness at work, almost half (46%) think diversity seems like less of a priority in the workplace currently, with 52% stating it should be more of a priority. The same report also uncovered that 53% of employees in banking and financial services said their employer makes token gestures that feel surface level when it comes to diversity and inclusion.

Diversity and inclusion have long been key factors for ensuring a positive and happy work environment, however the events of recent months, such as the resurgence of the Black Lives Matter movement, have resulted in these climbing up the agenda of many employers.

“The insights on diversity and inclusion uncovered in Culture Shift’s report really do resonate with me, as they shine a light on the lack of true representation across the UK’s positions of power. Employees are calling for their employers to focus on recruiting people from more diverse backgrounds, while providing training to the workforce on diversity and inclusion, confirming action really does need to be taken.

“If organisations want to create a happy work environment then they should take heed, as most employees confirmed working somewhere with a diverse workforce was an important factor to their happiness at work,” comments Olive Strachan MBE, founder of Olive Strachan Resources Ltd, global business woman and diversity and inclusion specialist.

The research found that fostering a diverse workforce representative of reality is a key factor for creating a positive culture and a key component for most employees’ happiness at work. With many calling for more to be done when it comes to ensuring that not only do under-represented groups have a presence in businesses, but also a seat at the table and a voice, there are various factors organisations should be keeping front on mind whilst planning for the future.

On fostering a diverse workforce, representative of reality, the research revealed that:

  • 80% of employees in banking/financial services said working at a company with a strong ethical background was important to them, with 84% stating that working at a company with a good reputation for treating employees fairly was integral to their happiness at work
  • Almost one-fifth (18%) said their employer could improve workplace culture by recruiting more people from BAME backgrounds, while one-quarter (25%) said by providing training to the workforce on diversity and inclusion
  • 15% said their employer could improve its culture and be more inclusive by recruiting more people from LGBTQ+ (Lesbian, Gay, Bisexual, Transgender and Queer) backgrounds
  • More than one-quarter (26%) said their employer could improve its culture by recruiting more people of varying abilities; while 21% said by recruiting a better gender balance
  • One-quarter (25%) said their employer could improve its culture by recruiting more people of different religions/faiths
  • 15% said their employer should prioritise the promotion of people from minority and marginalised backgrounds to improve its workplace culture

“To create an empowering culture for all employees, it’s absolutely essential for organisations to be diverse, inclusive and showcase true representation across all levels of the business. Not only do recruitment processes need to be inclusive, but promotion opportunities too, and employees from marginalised backgrounds need to be supported through their career, as well as other employees.

“We firmly believe this is an incredibly important conversation to have and the insights uncovered in our research solidify that we’re not alone in believing more action needs to be taken by those at the top. It’s a shift that won’t happen overnight, but there needs to be clear intent from employers to keep diversity and inclusion at the top of their agenda,” adds Gemma McCall, CEO, Culture Shift.

Culture Shift exists to lead positive change in organisational culture, through building products that empower them to tackle harassment and bullying.

“We hope the insights uncovered in our report, combined with the fact that diverse workforces are consistently proven to be more successful, result in employers making some tangible changes across the board to ensure their teams are truly representative of reality,” concludes Gemma.

To see more insights uncovered by the research or to download the full ‘Maintaining workplace culture in a rapidly changing environment’ report, visit info.culture-shift.co.uk/maintaining-workplace-culture.

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American Express and Amazon Business Launch Co-branded Credit Cards for Small Businesses in the UK

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American Express and Amazon Business Launch Co-branded Credit Cards for Small Businesses in the UK 2

The co-branded Cards offer flexible benefits and payment optionality by allowing small businesses to decide between earning rewards or adjusting payment terms on eligible purchases

UK small business Card launch builds on American Express and Amazon’s long-term relationship and co-branded Card programme in the US

American Express (NYSE: AXP) today announced the launch of the new Amazon Business American Express® Card and the Amazon Business Prime American Express® Card for small businesses in the UK. The Cards offer a host of rich rewards and payment flexibility designed to help businesses better manage their cash flow and gain greater insight into their spending.

The Cards provide an enhanced check-out experience on Amazon Business UK and Amazon.co.uk that gives Cardmembers the option to earn reward points or select a deferred payment term for each transaction, enabling them to make the best payment choice for their finances. Reward points can be earned anywhere American Express Cards are accepted and redeemed toward future Amazon purchases or applied to the balance of their monthly Card statement. This new Card programme in the UK has been developed as part of the on-going relationship between American Express and Amazon which includes a co-branded programme in the US and a global Card acceptance relationship.

This launch comes at a time when 63% of British small businesses say cash flow issues have led them to delay purchasing goods and services they need to run their business, according to new research from American Express and YouGov1. Nearly a quarter (23%) of the survey participants said they have put off ‘bigger ticket’ purchases over the last six months until they have funds available, and 38% of them are only buying the ‘essentials’ they need to keep their business operating.

Commenting on the new Card launch, Colin O’Flaherty, General Manager of UK Global Commercial Services at American Express, said: “We have been serving small businesses for over 60 years, and are passionate about helping our small business customers effectively run and grow their businesses, especially during this challenging period. With many UK SMEs facing financial hardships, we want to make it easier for businesses to manage their finances and continue accessing the goods and products they need with more options to pay. We know that a vast number of the UK’s businesses rely on Amazon’s wide-ranging products and services and are excited to launch this powerful and flexible new payment tool that will allow small businesses to select how to pay, purchase by purchase.”

Dave Brittain, Director of Amazon Business UK, said “Working with American Express to launch the small business credit Card was a natural decision for Amazon, given our shared long-standing commitment to helping small businesses flourish globally. We’re incredibly proud to launch this Card programme as it offers small business owners and entrepreneurs the best of both companies: the convenience and value they have come to know and love from Amazon, underpinned by the world-class service, benefits, access and security of American Express. These benefits have never been more important at a time when businesses are navigating the challenges and uncertainty which Covid-19 has presented.”

Amazon Business American Express Cardmembers and Amazon Business Prime American Express Cardmembers will have access to the following key benefits:

  • 2% Amazon Rewards points on the first £120,000 in purchases at Amazon.co.uk, Amazon Business UK and Whole Foods Market UK each calendar year, 1% thereafter or 90-day payment terms on such purchases for Cardmembers who are Business Prime members on Amazon Business UK
  • 1.5% Amazon Rewards points on the first £120,000 in purchases at Amazon.co.uk, Amazon Business UK and Whole Foods Market UK each calendar year, 1% thereafter or 60-day payment terms on such purchases for all other Cardmembers
  • 0.5% Amazon Rewards points on all other purchases for all Cardmembers

Both Cards come with a £50 annual fee, however, this is waived for new Business Prime American Express Cardmembers in the first year. Upon approval, new Cardmembers who are Business Prime members will receive an Amazon gift card with £50 value, and all other Cardmembers will receive a £25 Amazon gift card. As an added benefit for Amazon Business Prime American Express Cardmembers, their Cards will feature a unique vertical design that is composed of metal.

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Go Global To Expand Your Revenue Stream

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Go Global To Expand Your Revenue Stream 3

By Christian Spaltenstein, Managing Director, AFEX Americas

Banking and financial operations have evolved immensely in the past few years. Innovation in banking technology has set new standards for businesses, with multiple players actively participating in the journey to make financial services transparent, accessible and secure. In a globalized economy, where borders dissolve and even a micro-business can build an international footprint, a global payments offering is the magical key for any business to thrive. With competition from digital-first challengers, businesses are now realizing the importance of enhancing their product offerings to flourish in today’s internet based marketplace.

The pandemic has certainly played a massive role in forcing businesses to re-think strategies and optimize their operating model to suit the needs of the present economy. Ensuring business continuity is top-of-mind for many businesses who are struggling to remain afloat.

Expanding your revenue stream, especially during these challenging times, can be tough but profitable. A primary area of focus for many businesses today is to have an efficient and reliable supply chain. That could mean exploring unfamiliar markets and sourcing new service providers. Some businesses are also adapting their product lines to accommodate new needs in the market.

As other businesses effect digital transformations and find new ways of working, hacking is on the rise. Customers today want everything over the web; ensuring your systems are secure and efficient is even more important during these challenging times.

Businesses that are unable to cope with these increasing demands suffer the challenge of surviving and remaining relevant.

Companies that have been able to implement API solutions have observed proven success in achieving a multitude of business objectives. Automating financial operations with advanced technology solutions can help you not just differentiate your business, but also capture market share in today’s economy. It can add operational efficiency and help enhance your organization’s productivity—and as a result, revenues.

A trusted API solutions partner for global payments with an efficient banking and payments infrastructure can open your business to opportunities to grow internationally. It can also help your business to adapt to changing customer needs and offer services that can help you stay at the top of your game. Here are a few ways such solutions can help your business thrive and go global:

1. Currency risk management

Uncertainty due to ongoing market volatility can have adverse effects on your business’ profits. The ability to create forward contracts enables businesses to lock in a favorable rate and ensure financing certainty for their future currency needs.

2. Entrance into new markets

Introducing a business into new markets, or sourcing new services, comes with a host of challenges, the biggest being currency and payments. API solutions can support a business’ expansion plan today, tomorrow and in the future, with seamless scalability ready when it’s needed.

3. New revenue streams

A global payments API solution can help your business operate more efficiently. It offers a competitive edge, which can transform FX from a cost to a strategic advantage. As a business grows, so should its revenue.

4. Product growth and competitive advantage

An efficient FX and payments system can help businesses to steal an advantage in the market. Many business functions depend on either incoming or outgoing payments, and integration of these basic features into a business’ product can represent exponential growth in new users and wallet share.

5. Data is gold –

In today’s changing environment, protecting yourself and your customers’ data is a necessity. A secure and stable infrastructure to keep data safe helps you avoid financial and reputational damage— adding to your peace of mind—and increases customers’ trust.

Christian Spaltenstein

Christian Spaltenstein

A global payments partner can certainly help expand your revenue stream and strengthen your value proposition. However, it is critical to analyze your core competencies. Taking a look at your own cost structure and restructuring your delivery channels to best suit the needs of your end customer is essential. Using tools like AI can help you draw better conclusions about customer behavior, guiding you to choose the right enhancements. The objective for any expansion should be to improve the business ecosystem you operate in.

Your global payments partner should also be able to understand your target market and your business goals to better help you navigate risks and mitigate market volatility.

In evaluating a partner, key considerations include:

  1. Product knowledge and demand: Choose a partner with experience with companies like yours and the ability to adapt their solutions to your needs.
  2. Regulatory set-up: Make sure your partner is licensed and fully compliant across the world, and has robust cybersecurity protocols in place.
  3. Infrastructure: A well-developed, stable global payments infrastructure and robust payment rails saves you the time and resource you’d need to build your own.
  4. Cultural understanding for expansion: Communication and business practices vary across the world. A partner with a sizeable global footprint can help you navigate efficiently in new markets.

Times of crisis often produce innovation in processes and practices. The digital transformation of financial services has been extensively accelerated by COVID-19. Companies are seeking new ways to keep costs down while they weigh opportunities to expand internationally. Adapting to survive and ensure business continuity, especially during the ongoing pandemic is critical for businesses.

In times of uncertainty it’s important to keep both feet on the ground and ensure your operations are smooth and your data secure. Automating your global payments process is an important step in digital transformation. Adding efficiency and reducing errors can boost your profitability and can help you scale for the future.

 

This is a Sponsored Feature.

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