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Contract & Commercial Management in 2017

January 3, 2017

As we enter the new year, it is worth taking a moment to consider where we are coming from. I don’t support the view of many that 2016 was a year to forget. Certainly it was turbulent, unsettling and carried its share of human suffering and distress. Yet those are points on which we should reflect because they represent the challenges – and the opportunities – that we face going forward.

In general, society has embraced digital technology. It has permeated so many aspects of life and business. One key area is globalization, whether in the context of opening world markets or creating greater international awareness. But as with all innovation, the consequences are often unexpected and hard to predict. Research in 2016 pointed to one of the growing divides in human society – the fact that people in emerging markets increasingly see themselves as global citizens, while the trend in industrialized nations is in general the reverse. This is proving divisive within communities and has driven unexpected political consequences. Some view these as temporary set-backs, but perhaps they are indicators of something more fundamental and the need to question prevailing assumptions of economic and social progress.

As I look at the world from the perspective of those responsible for contract and commercial management, I see some fundamental threats and opportunities. The business landscape seems certain to remain turbulent, with uncertainties affecting geopolitical conditions and established trading terms and relationships. This demands far more intelligent risk management; far more agile capabilities; far greater commercial imagination; far better structured contracts and trading relationships. Those who win will be those who develop adaptive approaches to commercial innovation and governance, handling risks rather than avoiding them.

If this is the environment confronting senior management, they will certainly be looking for talented individuals to develop answers. Will they turn to their commercial staff – procurement, legal, contract management – as a source of creativity? Or will they see those functions as a source of the problem – rigid, oriented towards the rules and compliance policies of the past?

The quality of contract and commercial management will be a major competitive differentiator in the year ahead. One of the big and exciting changes that started to emerge in 2016 was the nature of the technology now available to support these disciplines. The growing power of automation and analytics is transforming the insight that a modern contract management function can deliver. It represents a potential turning point for business operations and the potential to end the outdated views of classical legal and procurement theory.

When I look at the year ahead, I cannot fail to recall a conversation that I had last year with a Turkish entrepreneur. I commented on how challenging it must be to run an established business in Turkey, surrounded by such high levels of political and social disorder, warfare on its borders, tense relationships with most international trading partners. He looked at me strangely before saying “Times of uncertainty are times of real opportunity. While others worry about risk, I take advantage of it.”

Those sentiments should be at the forefront of contract and commercial management thinking as we enter 2017.

 

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