Global banking layoffs are on track to be the worst in half a decade. Surprisingly, it’s not necessarily because of the usual culprits (COVID and the recession). The industry has been tightening its belt for a while now.
About half a million banking jobs have been cut since 2014. Banks are citing a need to reduce expenses so they can comply with stricter regulations and invest in digitization. For instance, last year Deutsche Bank cut 18,000 jobs to invest $15.4B into automating back office operations. HSBC cut 35,000 jobs and moved $20B in assets to a blockchain custody platform in its effort to digitize paper records.
From our customers in the United States we know one serious area where banks struggle to control expenses: finance contracts. Banks are losing billions of dollars (some estimates) simply through poor contract management. They lose it in missed renewal dates, termination dates and regulatory deadlines. They leave it on the table during negotiation, thanks to messy approval workflows and un-informed stakeholders.
At Evisort, we’re all about preserving financial services jobs and accelerating digital transformation. So, let’s look at the industry’s five improvement areas for better finance contract management.
1. Contract Management
Young employees have exposed the financial services sector for being… well, behind the times when it comes to contract management IT. For them, adapting to legacy systems is like learning to play Atari when you’ve grown up playing Xbox.
Of course, these “legacy systems” are sometimes little more than Excel sheets and Google Drive folders. Younger users want the same efficiency they enjoy off the clock. They’re demanding that internal contract management tools are easy to use, intuitive and productivity-enabling instead of productivity-draining.
2. Solution Integration
Banks are also notorious for having 10 of every solution. It’s not uncommon to see a department using Box, Dropbox, Google Drive, OneDrive and a smattering of homegrown systems. Part of that might be the legacy mindset. But it’s more likely because each line of business is run as an independent entity.
An institutional and consumer bank might have 500 CIOs. Those CIOs all use various tools since there’s no top-down mandate to standardize. Disjointed systems cause friction in nearly every stage of contract lifecycle management, from drafting to redlining to maintenance and renegotiation.
A centralized contract repository and end-to-end product that can execute both pre- and post-signature is key here. Contract management platforms also need to be integrated with business processes and back end repositories to truly make an impact. Otherwise, they’re no more useful than the thousand other bolt-ons and stop-gaps.
3. Contract Visibility
When financial institutions don’t organize their finance contracts, they can’t know what’s in them. When they don’t know what’s in their finance contracts, they can’t take action on them.
Without a robust contract management system, keeping track of every term and condition in every agreement across the organization is impossible. It creates a sort of “document soup” where the only recipe is a massive Excel spreadsheet. You would think that corporate counsel does the cooking.
Wrong. Interns, hundreds of them, manually log any and all data that might provide actionable insights. Key provisions like terms of service, limitation of liability and termination dates disappear into the spreadsheet.
By the time the information is resurfaced, it’s usually too late. New regulations have taken effect, the renewal date has passed, the vendor’s warranty is up. That’s how contract visibility can have a profound impact on the bottom line.
4. Contract Negotiation and renegotiation
Limited visibility bleeds right into the next challenge: running accurate and timely contract analysis to leverage better deal terms. Organizations that don’t have instant access to contract repositories are immediately disadvantaged during negotiation. Stakeholders can’t easily review other agreements to assess the fairness of the offer. They may end up signing on less-than-ideal terms because they’ve run down the clock searching for comparable documents.
Contract analysis can do wonders to improve a financial institution’s negotiation strategy. Pro tip: look for a contract analysis tool that can extract data from a contract right away. That’s an entire contract, sight unseen, and not just pre-negotiated clauses and provisions.
A good contract analysis tool makes it easy and quick to tag and train provisions to run custom analysis. This way you can search for standard or nonstandard language and be ready to negotiate new terms without any IT involvement.
“Easy and quick” are keywords here, given that new regulations and privacy laws take effect every year. If IT has to re-train the system with each new provision, it can take months to re-launch the tool.
5. Contract Workflow
The “10 of everything” mentality doesn’t just pose a nightmare for interoperability. It also complicates contract workflows. It’s not uncommon for documents to be passed among a dozen stakeholders between drafting, approval and negotiation.
Someone realizes the version circulating via email is different from the version saved in Box. The initial creator forgot to loop in the IT team. It’s back to the drawing board to nail down the right terms. Tracking down status and ownership is time-consuming, especially with remote stakeholders who can’t be flagged down in the hallway.
These deal-time bottlenecks and mistakes cost banks precious time and opportunities. Again, we stress the importance of an end-to-end contract management platform for streamlining contract workflows. Using one unified system to draft, negotiate, sign and manage finance contracts keeps every department on the same page. No one has to chase down approvals and deals always get signed on the best possible terms.
Manage finance contracts with Evisort
Major investment banks use Evisort to classify, extract and analyze key data from their most important finance contracts. Evisort’s best-in-class AI delivers unparalleled legal insights. Negotiate better deal terms and never miss another renewal date.
The recently launched Evisort Contract Workflow streamlines review workflows and reduces time to signature. This pre-signature module features instant compliant contract creation, automatic approval tracking and in-platform e-signature support.
Evisort is the first end-to-end contract management platform that automates both pre- and post-signature workflows. Evisort integrates with every leading document storage systems, providing one centralized repository for nearly any type of contract (230 and counting).