How does CLM Help Early-Stage Startups And SMEs To Manage Risk And Compliance?

Anirudh Vashishth

Why do SMEs need to set up an ERM Process?

For any business to taste success, it must face several threats and cross the hurdles of finding solutions. To see any explanation, implement a planned enterprise risk management (ERM) method to mitigate and control the risk of daily operations, accounts, and strategic direction within the organization. Also, to take control in case of any unforeseen events.

The purposes of the ERM are to:

  • Improve the organization's risk management capabilities by upgrading the already existing ERM functionalities.
  • Consideration and coordination of various verticals and integration of the risk assessment.
  • A consolidated output that provides a complete report to the various stakeholders and improves the organization's ability to risk management.

Entrepreneurship involves taking huge risks, and small and medium enterprises are more vulnerable to such risks' adverse effects compared to the more prominent organizations.

The SMEs, among several risks such as insufficient capital, workforce, competition, etc., mainly face the contractual execution of the business operations.

It is time that the entrepreneurs realize that the investors look beyond a simple revenue estimation, i.e., sustainability.

Is contract management lifecycle a good choice for SMEs?

Contracts constitute an inherent part of any business that guides the entire cycle relevant to the product or service delivery. A well-managed arrangement facilitates a clear understanding between both parties and reduces any obstacle of confusion.

Contract Lifecycle Management (CLM) strategically tracks and manages contracts signed among their stakeholders. A contract management solution guarantees the best maintenance of the contract in terms of performance and legal compliance. Though the digital contract management cycle is not a one-stop solution for businesses, it is an essential part that renders several legal and financial benefits.

The digital contract management system is a technique to track a contract from end to end and manage it during its life cycle. A CLM tool confirms that both parties profit as intended at every step of the intelligent contract, starting from the proposal to execution, storage, update, and expiry/renewal.

A CLM software confirms that all fundamental aspects of a contract – mutual approval, legal validity, acceptance, sufficiency, consideration, and legality are maintained smoothly. The contract lifestyle management also ensures the key performance indicators such as - contract stages, risk score, time management, and execution.

How will digital contract management software help SMEs in risk management?

Since 2018, the CLM tools started gaining much popularity, but it started being a necessity after the COVID-19 pandemic, as the changed working environment demanded digital adaption.

The digital intelligent contracts helped manage the risk of disparity between the order and delivery, improving the delivery and cost-saving and reducing manual errors.

In a report, Goldman Sachs claims that a CLM process enjoys a reduction in operational process cost by 20% and the error in payments reduces by 80%.

There are more benefits of using CLM which are listed here:


CLM Providing Solution


Establishment of a streamlined process  

The contract management system introduces several stages such as 

  • Authorization

  • Negotiation

  • Approval from the parties and concerned authorities

  • Storage of data

  • Tracking of the contract execution

  • Reporting

Any misappropriation or breach of the clause gets smooth identification by the contract lifecycle software, saving the business's reputation.

The CLM software provides a streamlined process to ensure effective handling of the contract at every step.


Simplified tracking and monitoring of the contract

Monitoring the contract is essential for the milestone, timeline, and compliance. A contract analytics program tracks the potential risks and creates a team alert. Therefore, Digital contracting saves the company's effort, time, and goodwill.


Removes the chances of manual errors

The manual management of the contract adheres to several chances of mistakes, and the rectification and the process itself take immense time and effort.

Human-related mistakes are one of the main reasons to implement digital contract management software.


Adherence to compliance

Compliance is a crucial aspect of any contract, and any divergence from compliance or contractual commitments can negatively affect the companies both financially and legally. Therefore, contract lifecycle management is necessary to maintain compliance to avoid litigations. 


Easier contract collaboration 

The digital management of contracts offers a repository that is centralized for storage. CLM ensures the privacy and security of the cloud storage used for handling arrangements. The workforce having access to the cloud can securely proceed with the collaboration approach.


Cost-saving and time-saving

One of the big names, PriceWaterCooper, has shown a 2% savings in the annual cost by he minimized errors and eliminating inaccuracies in the buy and sell-side of a contract.

The contract management platforms are equipped with the facilities streamlining the operations, easy searching of contracts, minimizing errors, and avoiding the networks.


Encourages customers to trust and increases the brand reputation

A well-managed contract lifecycle plays a vital role in accumulating customer trust and meeting expectations. It promotes brand name and customer retention increases. Reports indicate that inaccurate contracts or terms are one of the elements that lead to value leakage and brand name. 

Key Takeaways:

  • Successful entrepreneurship involves facing risks and implementing a well planned ERM process.
  • In the era of digitalization, the operational execution of the contract demands an up-gradation, which is supplied by the CLM tools.
  • The right contract management software manages the risk of disparity, saves cost, time, effort and reduces manual errors.