Icertis Analysis Assesses Exposure of Global 2000 Firms to Brexit-Related Contract Risk

Icertis, experts in cloud-based enterprise contact management, has undertaken a survey using advanced machine learning looking at a sample of its 6.5 million-strong database of contracts managed within its Icertis Contract Management (ICM) platform. The reason: to identify the level of exposure of companies to Brexit-related contract risk and the implications of non-compliant contracts in a post-Brexit world.

The timing is no coincidence of course with many firms still in limbo, waiting to fully assess the potential risk to trading relationships within their contract portfolio, until policy and regulatory changes are finalised. But Icertis warns that immediate action is needed for organisations to address the impact Brexit will have on their contractual obligations. It found that for enterprises with operations spanning the European Union, more than 10 percent of their contracts could be at risk of regulatory, freedom of movement, tariff, customs and other jurisdictional impacts created by Brexit. The average Global 2000 corporation has tens of thousands of active contracts in the EU, it finds, and the number of affected agreements could be massive, and the effort to amend them significant.

“Companies that lack the ability to quickly assess the impact of Brexit-related changes to their contracts – or cannot rapidly revise agreements once Brexit details are confirmed – risk non-performance penalties, missed obligations, compliance fines and commercial disruption. Conversely, companies that have invested in and deployed contract management software that gives enterprise-wide visibility into all agreements and their commercial details will have the strategic agility to manage Brexit’s impact, regardless of its final form,” says the firm’s press release.

Bernadette Bulacan, Lead Evangelist at Icertis told us: "Our study found that more than 10% of all contracts held by Global 2000 businesses may create compliance and regulatory risk following Brexit, which should act as a real warning siren for businesses that currently lack the ability to quickly assess the impact of Brexit-related changes to their contracts – or cannot rapidly revise agreements once Brexit details are confirmed. The sector a business operates within will of course impact the degree of severity by which a business’s contracts will be affected. For example all businesses collecting data will need to adjust contracts for certain GDPR amendments, this will also ring true for Pharmaceutical companies, where regulations are already particularly stringent.”

In 2018, Thomson Reuters Regulatory Intelligence captured more than 57,000 regulatory changes and updates from over 900 regulatory bodies worldwide – an average of 220 per day. Icertis believes the pace of regulatory change worldwide is quickening and driving contract management technology adoption.

Just last year Icertis opened an office in London, also in Paris and Sofia, to service growing demand – in fact the firm had quadrupled its European customer base in the space of a year. The Paris and London offices are hubs for regional operations while Sofia was opened as the firm’s first multi-lingual customer support centre. It now has six European offices alongside Frankfurt, Stuttgart and Zurich. It then announced in July last year it had closed $115 million Series E funding round to make it the first CLM software provider valued at more than a billion dollars.

Our GM Jenny Draper said at the time, “It’s powerful to think of contracts as ‘strategic business assets’ and I think that’s what isn’t widely recognised. Negotiating and authoring contracts can be some of the most painful, expensive, acrimonious, drawn-out months of work. Managing a contract through its life without alerts to key timelines and success measurements is, at best, patchy. Being unaware when contracts are up for renewal, or not having full visibility of supplier T&Cs, can put organisations at serious financial, legal and reputational risk.”

Read more about the rise in contract management software in our analyst Pro piece here, which states: “… the CLM market is throwing off its shackles as a place for glorified document management systems set up by legal departments to transfer commercial risk to counterparties. Rather, contracts are becoming the ultimate system-of-record for B2B commerce, not just from a legal department standpoint, but a financial one (e.g., where contracts become the new ledgers that augment the G/L), a regulatory/risk standpoint, and an operational one relevant to any place where internal/external stakeholders make commitments to each other.”

 

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