by Jim Wagner
Earlier today we announced the release of our Vendor Contracts Compliance (VCC) analytics package. The VCC package takes the otherwise intensely manual process of reviewing supplier contracts for compliance purposes and delivers an unprecedented level of automation, sophistication and transparency. For anyone running a regulated business, or anyone who delivers services to a regulated business, this is big news. Here’s why.
Over the past decade, large businesses have become increasingly dependent on outsourced relationships. For regulators, this trend toward outsourcing has caused tremendous concern and increased focus on managing “unmanaged” risk. So what does a regulator do to regulate an unregulated business? They require the companies that they do regulate to impose additional protections in their vendor contracts. This is where it gets tricky.
Complex Regulatory Frameworks
Complex regulatory frameworks, like OCC 2013-29, explicitly require banks to address more than 50 unique issues in a detailed and rigorous fashion. For example, the OCC wants banks to ensure that they can audit their suppliers. So confirm that your contracts have an audit clause and you’re all set, right? Not so fast. Before you “check that box” you have to look at the following:
- Does the audit rights clause ensure that the bank can engage a third party to conduct audits?
- Can the regulator conduct audits as well?
- Does the audit rights clause extend downstream to the supplier’s subcontractors?
- Does the audit rights clause address all of the following: performance, controls, risk management policies and network security?
So many suppliers, so many contracts (many of which pre-date the current regulatory framework) – what’s a regulated business to do?
Why the VCC Technology-Based Analytics Solution?
As I mentioned in my blog this summer, manually reviewing contracts and detailed clauses one at a time is problematic. For starters, big businesses have thousands, sometimes tens of thousands, of sourcing contracts. Just finding the agreements can be difficult. But the biggest challenge, of course, is identifying the clauses of interest and confirming that these clauses contain the requisite elements to satisfy the regulatory requirements. This is particularly challenging for a company reviewing contracts that are not based on its own forms. This is why we developed the VCC technology-based solution. Here’s what we did.
Given our years of predictive coding and review acceleration experience, we took the same automation approach to analyzing individual clauses in commercial contracts. We created specific analytics to identify not only the relevant clauses, but also the critical underlying components of the clauses, to massively accelerate the review of these contracts for compliance purposes. As a frame of reference, the manual review of a standard sourcing agreement for compliance purposes can take anywhere from 2-5 hours. With VCC, we typically can analyze those same contracts, with a tremendous degree of accuracy, in an hour or less.
But maybe the greatest trick with VCC is what we can do from a reporting standpoint with the information that we analyze. With VCC we can not only tell a client whether a topic is addressed generally in their contracts, but we can also share with the client at a macro level the specific clause components that are present or missing. This level of detail allows our clients to accurately report to their regulators and also enables them to quickly make risk and remediation decisions.
We built the VCC on the Seal Software 4.0 contracts discovery and analytics platform. We picked Seal for the rollout of VCC because of Seal’s focus on the enterprise business community, Seal’s built-in “out of the box” contracts analytics, and Seal’s proprietary “ScA” analytics package that gives us the flexibility to create and constantly improve our custom analytics—ideal for the evolving regulatory environment. For our customers that require assistance in identifying their vendor contracts, Seal also has the unique ability to crawl networks and find “rogue contracts.” Seal made an announcement today and issued a blog regarding the VCC package, as it’s one of the first packages built on the Seal 4.0 encrypted and flexible “Extraction Pack” model.
As you can tell, we’re excited about the VCC and the opportunity to change the way businesses address the challenges of obtaining insight into their supplier contracts. But we’re not stopping here. Over the next weeks and months, we’ll be introducing similar Apogee Analytics Packs™ designed to address a variety of other common business challenges (M&A due diligence and integration, identifying cross-default obligations, etc.) that are essential to our clients’ businesses.
We conclude today’s press release, and all of our press releases, with the quote “Apogee Legal is committed to eliminating waste in the business of law.” The VCC does just that, and it’s only the beginning ….