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A new report released today by World Commerce & Contracting (WorldCC), in collaboration with Deloitte, sounds the alarm on the declining effectiveness of contracts in today's business landscape. The global report, titled 'The Purpose of Contracts,' reveals a stark reality: only 39% of legal and contract professionals believe contracts are achieving their intended goals. Furthermore, a mere 16% feel that contract negotiations address the most critical business needs. These findings highlight a growing disconnect between the traditional role of contracts and the dynamic requirements of businesses operating in an increasingly complex and interconnected global marketplace.
Key findings from the report include:
- Declining Effectiveness & Value: Contracts are falling short of their core objectives, with a 40% average decline in effectiveness since a 2017 study. They're struggling to foster collaboration, nurture business relationships, or even reflect company values, hindering their potential to drive business success.
- Misalignment & Complexity: Contracts are often criticized for being convoluted and difficult to understand, with an even 50/50 split between those finding contracts easy to understand versus those finding them difficult. This complexity, coupled with a lack of flexibility to adapt to evolving business needs, creates misalignment and hinders its usability.
- Inefficient & Fragmented Processes: The contracting process itself is riddled with inefficiencies, including unclear ownership, resource limitations, and misaligned goals between teams. A striking 76% of professionals report experiencing significant friction and inefficiencies in the process, leading to costly disputes, missed opportunities, and damaged business relationships. Dissatisfaction with contracting processes has even grown by 5% since 2017.
The repercussions of ineffective contracts can be severe. Beyond missed opportunities and damaged relationships, businesses risk finding themselves in legal hot water due to poorly drafted or outdated agreements that fail to address evolving compliance requirements and business realities.
"The findings of this report serve as a wake-up call for organizations worldwide," said Tim Cummins, President of WorldCC. "Contracts are more than just legal safeguards; in many situations, they should be dynamic tools that support collaboration, mitigate risk, and create value. This report underscores the urgent need for fresh thinking in how businesses approach and manage contracts."
To achieve this transformation, the report advocates for a shift towards a more strategic and collaborative approach to contracting. It urges stakeholders to prioritize clarity, flexibility, and alignment with business goals in contract design and management. It also emphasizes the importance of investing in training and technology, particularly leveraging advancements like AI, to streamline processes and improve decision-making.
"There is a real opportunity for organizations to rethink some of the ingrained contracting habits. By treating contracts as critical business assets that reflect and keep in step with today’s complex trading relationships, we reveal their primary role, i.e. economic instruments designed to support the delivery of commercial value,” added Peggy Pauwels, Partner at Deloitte Legal.
The report concludes that contracts have the potential to be powerful tools for driving business success, but only if organizations are willing to rethink their traditional approaches and embrace a more holistic and adaptable mindset. It calls for a fundamental shift in how contracts are perceived, drafted, and managed, emphasizing the need for collaboration, clarity, and strategic alignment.
About This Study
This report revisits a 2017 study to assess whether there have been improvements in how contracts are perceived and utilized. The research team conducted a survey of 370+ international organizations and in-depth interviews with experts and senior practitioners from various fields, such as law, finance, procurement, and commercial management.
The ‘Purpose of Contracts’ report is available for download on the WorldCC website: https://info.worldcc.com/purpose-of-contracts
World Commerce & Contracting
World Commerce & Contracting (WorldCC) is a not-for-profit association dedicated to helping our global members achieve high-performing and trusted trading relationships. Research is at the heart of our work. Relevant, rigorous and high impact, our pioneering insights shape policy and deliver better practice worldwide. With 75,000 members from over 20,000 companies across 180 countries, the association welcomes everyone with an interest in better contracting: business leaders, practitioners, experts, and newcomers. We are independent, provocative, and disciplined, existing for our members, the contracting community and society at large.
Deloitte
Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax, and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the 'Deloitte organization') serves four out of five Fortune Global 500® companies. Learn how Deloitte's approximately 415,000 people make an impact that matters at www.deloitte.com. Deloitte's Legal Business Services practice supplements Deloitte's existing legal department offerings, which include legal management consulting and legal managed services designed to streamline, automate, and transform legal departments. Specific services offered include contract lifecycle management, legal entity management, regulatory consulting, knowledge management, data governance, legal spend analytics, legal sourcing, and forensics. Deloitte's Legal Business Services practice, in collaboration with Deloitte Legal, which practices law outside the US*, provides clients with a unique global approach to the marketplace. *The Deloitte US firms do not practice law or provide legal advice.
Contact Info:
Name: Kate Hodgins, Head of Marketing
Email: Send Email
Organization: WorldCC
Website: http://www.worldcc.com
Release ID: 89144565
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