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A new year makes no difference ….

January 6, 2015

It is conventional at the start of a new year to reflect on what went before and to forecast what lies ahead. In reality, the change of a digit in the date has no significance. The world of contracts and commercial management was just the same on January 1st as it had been on December 31st.

The real point of a new year is psychological. It is a time when we look back on what has been happening and pause to assess its impact and our readiness for what lies ahead. There are indeed many continuing trends that are of very real significance to those in contract and commercial management and which demand some level of preparation and action. Here are some examples, which IACCM will cover in more depth in its webinar ‘2015: What lies ahead?’ on January 20th (to register, click here).

1. As markets and supply networks fragment and diversify, contracts and contracting disciplines are becoming more important as connectors within and between businesses. This is causing executives to push for increased competence in both contract and commercial management.

2. Contracts and relationship management are merging to form ‘relational contracting’, which shifts much of the focus onto performance management and governance. This has significant impact on negotiated terms and creates increased dependence on ‘good will’.

3. The shift away from risk allocation and price towards risk sharing and value is resulting in increased use of performance and outcome based contracts. Research shows that most contracts and commercial practitioners have little knowledge or experience of these agreement types.

4. The public sector is undergoing revolutionary changes which will continue to drive commercial innovation. Governments are at the forefront when it comes to a need to redefine services and their delivery models. This imposes a need for far greater contract and commercial skills and capabilities.

5. Risk and sustainability continue to evolve as issues that demand innovative approaches. Among these, trading partners will become more integrated and selection criteria will adjust to measure integrity, agility and to ensure greater cultural fit.

6. Market volatility and technological change continue to demand greater flexibility in trading relationships. Economics, not the law, will be the key determinant of ‘good contracting’, demanding greater financial analysis and closer integration with contract terms.

7. The true potential of data and analytics arising from the field of contracting (and in consequence impacting the entire future and value of the discipline) will continue to emerge. Practitioners who utilize this data will flourish; those who ignore it will become irrelevant.

Overall, the news for contracting professionals is a mix of good and bad. But those who prepare can certainly tip the balance in their favor. Join the discussion on January 20th!

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  1. And the list continues to grow … | Commitment Matters

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