Assignment Scenario:
You have just been hired at an exciting, new company called "Pioneering Business Solutions" that is growing at a fast pace. This company has developed an innovative product that it sells to other businesses. In the supply chain, the company has contracts with vendors who supply important components necessary to design and build the product. Once the products are built, the company has a sales team who market and sell the product to other businesses. Right now, the company is based in Florida, but they plan to start selling nation-wide very soon.
The Board of Directors want to implement strong internal controls around the contract process before they roll-out nationwide. Your job is to identify best practices around contract risk management and put in place policies and procedures to ensure that the contract process is efficient, transparent to the Board of Directors, and reduces the risk of financial loss to the company.
Your final product will contain 2 items which are explained below: 1) Presentation and 2) Contract Risk Management Policy. We are looking for your interpretation and opinion on how best to implement contract risk management. Everyone's final assignment will look different. Feel free to be creative and focus on topics that interest you.
This assignment is worth a total of 120 points.
Part 1:
You have been asked to make a presentation to the Board of Directors about your plans to implement an effective contract risk management program. Please prepare a short presentation explaining what Contract Risk Management is and why it is important to a company. You will want the Board of Directors to support your plan and provide you with additional resources, so focus on the financial and other benefits to an organization from implementing a Contract Risk Management Program. You can use PowerPoint, Google Slides, or any other format you are comfortable with and notes at the bottom. It should be no more than 10 slides.
Part 2:
Write a Contract Risk Management Policy for the company that includes the following
An introduction or statement on the purpose for the Policy
A section identifying what contracts are governed by the Policy; and
A description of 5 internal controls designed to mitigate against risk at different stages of the Contract LifeCycle.
For the internal controls that you choose to include, describe the internal control, when it applies in the contract process, who is responsible for ensuring compliance with the Policy; and how it should be followed. Consider issues around both the supply-side contracts with vendors and the sales process around contracts with clients. It is up to you what areas you want to focus on in the Policy.
Include enough details so that a person reading the Policy for the first time would understand the goal of the policy and be able to explain the processes in place. Use headings and format it so that it is easy to read and understand. You can use the policies that were provided as part of the reading material for Module 11 as examples. Your Policy should be no more than 5 pages long.
Extra Question
Create a set of contract related metrics that the company can use to measure the efficiency of the contract process. Identify between 3 and 6 metrics that are relevant to the company and will provide actionable data that the company can use to identify areas for improvement. Consider some of the metrics below and feel free to come up with your own metrics. Include a paragraph explaining why you choose those metrics and how you think the company can use them to improve the contract process over time. This should be a one-page Memo that the company can use going forward.
Capture Metrics
- What is the average number of new contracts executed per year?
- What is the average number per contracting professional?
- What is the contracting cycle length?
- What is the average time from the point the company makes an offer to the point the contract is approved, to the point it is executed and finally to when the value of the contract is realized?
- What is the percentage of contracts on standard terms vs. non-standard terms?
- What is the average term of a contract?
- What is the percentage of contracts that are renewed?
- What is the percentage of contracts that have SLAs or KPIs?
Use of Metrics
Answer questions like:
- Is the drafting and negotiation process efficient?
- Are there standardizations or improvements that could be made to reduce the cycle time?
- Is the "hand-off" process efficient?
- Are there the right resources at each stage of the process to be cost-effective?
- Should the organization make changes to its standard contract?