LinkedIn - GOAL Contracts Management & Compliance 9.22.15

Global Outsourcing Association of Lawyers Spiwe L.A. Pierce

Deputy General Counsel October 14, 2015

© Spiwe L.A. Pierce

4 © Spiwe L.A. Pierce

1. Define the critical risks you are most concerned about 2. Determine types of contracts you have (e.g. commercial

agreements, purchase orders, bids and RFPs, purchasing contracts, agent/distributor agreements etc.)

3. Determine risk in your current portfolio 4. Consult your commercial teams

• What’s working and not working • What’s not happening that should be • What’s happening that shouldn’t be

5. Determine where risks should be addressed, e.g. • Legal department • Trade compliance • Insurance • Environmental Health & Safety • Operations & Supply Chain • Human Resources

6. Determine ideal contract review process flow for various types of contracts


Examples may include agreements or provisions related to: • Intellectual property • Mergers, acquisitions, joint ventures, or strategic

alliances • Frame, master service, open volume, multi-site

agreements • Non-competes • Settlement of litigation or claims • Supply or sales agreements containing certain

provisions • Other contracts containing specific risks, e.g. uncapped

indemnities, evergreen provisions, most favored nation clauses, minimum purchase obligations, etc.


Risks in the Contracting Process

Historically, no structured contracts process

Minimal review by BUs focused on commercial terms

Legal review fragmented and often incomplete

Commercial teams forced to shuttle contracts to multiple functions for review

Substantive Contractual Risk

Most contracts not on our paper

x% with uncapped indemnities

x% with some cap on indemnities (the rest are silent)

x% exclude consequential damages

Insurance provisions in x% of contracts fall outside permissible standards

Average contract term = x years

0

10

20

30

40

50

60

1980 1990 2000 2010 2020

Volu

me

# of Commercial Contracts by Effective Date


Data-driven approach will drive more analytical approach to: • Contract reviews • Contract deviations • Mitigating existing risks in the portfolio • Addressing high risk provisions

0

5

10

15

20

25

30

200

1

200

5

200

7

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

No T

erm

.

Conseq. Dms

Auto-Renewal

MFN

Arbitration

Example: High Risk Provisions Against Contract Terminations


Commercial Relationship

NDA

Business Issues Review/

Discussion

Triage / Review

Negotiation

Approvals

Execution

Ownership & Maintenance

Renewal / Termination

Contracts

Lifecycle Supply

People

Contract Administrators

BU Commercial Teams

Internal Legal Staff

Law Firms

Systems

Intranet

Templates

Playbooks

Policies & Forms

Training Materials

RFQ/Bid Processes

Demand

Quantity

X annual volume

X variance in monthly/ quarterly cycles

Quality

x% on company paper

x% within standard warranties limits

x% capped liabilities

x% within standard insurance limits

Stages handled by the business

Stages handled by Legal


Commercial

Review

•Business unit reviews commercial terms, obtains necessary commercial approvals, complies with relevant

policies

Legal Review

•Submit Word doc of proposed agreement and exhibits for review

•Legal completes review and returns contract to business

Negotiate &

Execute

•Get all required approvals

•Comply with Delegation of Authority, policies & escalate to Legal if high risk terms remain

•Finalize draft and all attachments, return to Legal for Seal of Approval

•Date, sign contract

Submit &

Store

•Submit executed PDF to Legal for uploading to SharePoint database

•Store original contract in secure fireproof location OR

•Send original contract to Legal for storage and maintain a copy for your use

Stages handled by the business

Stages handled by Legal

12

• Have an effective strategy and implementation plan based on input from all stakeholders

• Ensure senior leadership support and use them to drive change

• Obtain buy-in from all impacted commercial teams – you’ll need it to ensure and enforce compliance

• Assess whether you need law firm or vendor support

• Plan people and financial resource allocation carefully

• Extend your department’s reach by engaging a core group of supporters/executors in your business



Log/Triage

To Contract Reviewer

Insurance Review

- Charlie Chu

Trade Compliance

- TC Counsel

Property/ Leases

- Property Counsel External

Insurer

May use Insurance Designee

Americas - Insurance

Guru 1

Asia-Pac - Insurance

Guru 2

Europe -

Insurance Guru 3

Africa - Insurance

Guru 4

Agent & Distributor

- A&D Manager

All contracts - Bill Bee

Specialty BUs - Legal

Business Partners

To outside counsel when necessary (specialty contracts/overflow)

Contracts Manager - Tracy Triager

High risk contracts to Senior Leadership per Delegation of Authority policies

Keep refining until your model works as you need it to

Activities that occur within the Legal function


Legal provides guidance, but commercial teams make the final call, e.g. • Liquidated damages • Product warranties • Delivery terms • Payment • Confidentiality • Quality • Appendices, schedules,

exhibits • All other contract provisions

Commercial Terms Legal Terms

Legal may review and approve limited to high risk provisions, e.g. 1. Assignment and Severability 2. Change in control 3. Dispute Resolution 4. Governing Law 5. Indemnity (incl. damages) 6. Insurance 7. Intellectual Property 8. Legal warranties 9. Liabilities cap 10.MFN (Most Favored Nations) 11.Termination

Terms reviewed by commercial teams

Terms reviewed by Legal

16

• Identify significant issues that can derail your program

• Non-compliance

• Contract review cycle times

• Establish an expandable model between in-house and external/local

counsel to handle volume and local language contracts

• Be creative in addressing those problems

• Consult the business

• Consider external help

• Consider electronic solutions

• Take an iterative approach

• If at first you don’t succeed, try, try, try again!

• Scale the solutions as needed

• Take your stakeholders with you



Require Legal to

apply “seal of

approval” to all

finalized

contracts before

signature

Metrics

Tracking

&

Reporting Contract

Review

Process

Agent/

Distributor

Dashboard

Report

Audits by

Legal and

Internal

Audit

Email Alerts

for Expiring

Contracts

Periodic

Contracts

Email

Update Training

& Commun-ication

Purchase Order

Process

Standard Operating Procedures

Policies & Proce-

dures

Legal Business Partner Support

Outside Counsel Support

Manuals Attorney Playbook

Commercial Approval

Log

Commercial Approval

Log

Commercial Approval

Log

Commercial Swim Lane


5 8 8

18

9 9 9 8 10 9 10

5

0

10

20

30

40

50

60

70

Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

Day

s

Month

AverageCycle Timefor FirstReponses

Volume

Volume & Average Legal Cycle Time

Use metrics to track and demonstrate relationship between contract volume and cycle times within Legal


• Take your stakeholders and senior leadership with you at every step • Partner with other internal stakeholders (e.g. Finance, HR, Quality etc.) • Consult them, consult them, consult them! • Address their pain • Incorporate their feedback into your solution • Incorporate their existing processes into your contract management

program • Tell them, tell them, tell them! • Keep asking questions • Keep looking for ways to improve • Take a measured approach to training (i.e. develop core target

audiences for in person training, manuals, policies, legal guides, playbooks etc.)

• Recognize your best supporters • Share and celebrate your successes • Use metrics to drive change and tell your success story


Communication Frequency

Metrics reports to senior leadership, identifying contract volumes and specific contracts reviewed to report progress and identify gaps

Monthly

Global Contracts Group Roundtable: two-way teleconference with BU contract leaders to discuss issues, trends, business needs, and address areas of non/compliance

Quarterly

eNewsletter to commercial teams providing guidance, highlighting areas of concern, and calling the business to action as needed

Quarterly

Training for LBPs and outside counsel on contract terms per Contracts Manual and Playbook

Annual/ ongoing

LBP communications at annual sales or strategy meetings and in conversations throughout the year

Annual/ ongoing

“Rules of Engagement” letter from Legal and Finance communicating compliance requirements to the finance community

At least annual

Letters of assurance submitted by the business verifying compliance and disclosing deficiencies

Annual

Legal site visits for training & compliance monitoring/ coordination with Internal Audit across multiple sites

Annual

Global webinar training to commercial teams on process and compliance expectations

Annual


Persuasion is not a sprint, it’s a marathon.

LinkedIn - GOAL Contracts Management & Compliance 9.22.15

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