Smarter contracts, better margins
In collaboration with
Executive overview
Twenty years ago, 1 in 3 finance functions had direct responsibility for contract management. Today, it is more like 1 in 10.
The massive growth of regulation, contract complexity and disputes led to a steady shift towards Legal, either as direct owners of contracts or as the perceived focal point for the process. In that shift, the economic and financial impact of contracts has somehow become relegated to a lesser role. This telling quote from Ian Macneil, legal scholar and inventor of relational contracting, is too often ignored:
“Contracts are not ends in themselves but instruments by which parties achieve economic purposes in ongoing relations.”
This report is a reminder that contracts must be understood and managed as dynamic economic instruments and that achieving this requires greater connectivity between commercial, legal, procurement, and finance functions. Drawing on WorldCC research, external studies, interviews, and case evidence, the report provides a practical and persuasive case for change, emphasizing not only why finance connectivity matters, but how it can be realized to deliver measurable value.
“As I reflect, 20 years ago I saw terms such as liabilities, indemnities and IP rights as my direct responsibility. Today, I recognize the extent to which my team has stepped away and no longer sees these as opportunities for financial trade-offs.” CFO, global technology supplier
Smarter contracts, better margins
Key points to this report
- Contracts are central to every revenue and cost decision, yet in a survey representing almost 200 organizations, 70% acknowledge a disconnect from financial oversight, or adequate appreciation of their impact on financial performance
- Volatility and complexity demand more adaptive, data-driven contract practices capable of rapid adjustment to altered economic conditions, yet most procurement and legal teams resist the need for regular contract reviews
- Emerging technologies such as Artificial Intelligence (AI), Contract Lifecycle Management (CLM) and Enterprise Resource Planning (ERP) integration, now make real-time financial alignment possible, yet low levels of investment in post-award capabilities are resulting in high levels of value erosion
- Organizations that embed financial insight into contract strategy and execution are outperforming peers by an average 5.4% of contract value
- The call to action: create shared visibility, redefine governance, and unlock the full value of contracts.
69% of respondents say there is a consistent disconnect between legal protection and financial opportunity, during template development and contract negotiations.
Digital transformation enables a new model of connectivity. From paper to performance: the digital impact
Smarter contracts, better margins
Conclusion: Building shared ownership
Written by
Tim Cummins
An international, cross-industry career that has moved from corporate management to extensive research, advisory and capability development services to public, private and third sector organisations. Tim has lived and worked in the UK, France (3 years), and the United States (20 years), building an impressive research and entrepreneurial record with a demonstrated commitment to delivering social benefit. As Founder and President of World Commerce & Contracting (formerly International Association for Contract & Commercial Management), Tim has built a 72,000-member worldwide non-profit association which increasingly influences commercial policies and contracting practices in major corporations and governments. In September 2019, he was presented with the Financial Times ‘Market Shaper of the Year Award. Tim was, until recently, Professor and Chair of International Commercial & Contract Management at the University of Leeds, School of Law, where he taught and led the development of inter-disciplinary commercial programs. Prior to founding World Commerce & Contracting, Tim was on the Chairman’s staff at IBM Corporation and led the development of worldwide commercial processes and skills. His early career included management roles in the banking, automotive and aerospace industries, where he led negotiations up to $1.5 billion in value. He has served in advisory roles for government departments in various countries, including the US, UK, Australia, Canada, and Japan.
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