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Why CLM software is critical for weathering a recession

With experts speculating a strong likelihood of economies being hit by a global recession, industry leaders are seeking, weighing and making tradeoffs for initiatives that matter.

As their businesses continue to face ongoing economic uncertainty, many are pulling out of investment decisions, many on the other hand, are marching towards smart investments that will contribute to securing their futures in the choppy waters to come.

Legal tech investments in specific, are likely to remain on the to-dos of leaders who are keenly evaluating the risks to rewards ratio while drawing up their strategies for 2023. And while they are likely to be impacted by the downturn, investments that make a strong case for value creation will stay in the race till the end.

Expert analysts from Gartner stand behind this statement. In a recent article titled ‘9 Winning Actions to Take as Recession Threatens’, Gartner talks about differentiating with technology amidst uncertain times. They spell out how businesses should focus on digitalization and anticipate that successful leaders will be playing ‘digital offense’ in this time of crisis. As per their piece, accelerating the right digital initiatives should be at the core of must-take actions today.

In the context of legal tech, contract digitization is emerging as an essential tool for managing risk and adapting to changing conditions. Whether one is preparing for a potential recession or simply looking to improve efficiency, contract digitization is a must have tool to weather the economic conditions businesses face today.

Here are five ways in which CLM software investments pay dividends and contribute to growth and productive output in the legal team:

1. Complete access to your contracts

You can’t fix what you can’t see. A report by the International Association for Contract and Commercial Management found that 88% of business users struggled to find and comprehend their contracts. This becomes a challenge when your contracts are stored across devices and not located in a centralized, easily accessible place.

And while no time is a good time to lose contracts, it can be especially costly when the market is volatile. The likelihood of disputes, under-delivery, contract-defaulting and vendor bankruptcy etc. Is especially high.

To fight these fires, it is important to be able to find a relevant contract in no time. CLM software provides all stakeholders seamless access to your contracts and keeps your business moving.

And by housing contracts into one digitized, searchable repository, CLM solutions enable the first step into better contracting during uncertain times.

2. Faster decision making:

In times of crisis, the speed of decision making can be a key differentiator, it can even be the difference between a company surviving or going under. In order to take timely and informed decisions about any of your contracts, you first need to ensure complete visibility into their terms.

This is not limited to having access to a contract but being able to dig deeper and extract clause level information. This can include – the specific language you’ve agreed to, obligations, timelines, key supplier metrics etc. And this is essential to drive business critical decisions.

Best-in-class CLM solutions like Zycus’ iContract provide a robust repository that helps you locate contracts and allows you to drill down and find clauses or phrases within contracts easily. With advanced free text /metadata search capabilities, it converts static documents into treasure troves of information that can assist business decisions. This information is available in real-time via user-configurable reports and dashboards that users can make based on their needs.

Making contracts ‘searchable’ gives you an edge by amping up the speed of decision making. Being able to check on crucial information at the time of negotiations, renewals, etc. can help you make an informed and profitable decision.

3.  Heightened control

Post-signing, contracts need strict monitoring to keep track of important deadlines, renewal times, obligations and more.

A study by ‘World Commerce and Contracting Association’ shows that an average of 9.2% of company’s annual revenue is lost due to common contracting mistakes, like slow negotiations and missed milestones.

It is advisable to stay on top of key information like the service-level agreements, current contract utilization, overpayments, delivery of entitlements, penalties and other important metrics like renewal timelines.

For example: If you are unclear on renewal timelines, you could miss your chance to terminate an unnecessary contract or renegotiate more favorable terms with the vendor. The lack of information here robs you of the power to make a favorable decision.

With manual contracting, it is easy to miss renewal deadlines. But when your contracts are stored in a CLM solution, you stay on top of important information such as deadlines. You can view all important dates and details in one place and take the right action at the right time. Custom reporting features and reminders prevent missed contract deadlines and expiration dates.

Being able to ‘set up alerts and reminders’ for important milestones and obligations gives you heightened control over every contracting decision that takes place in your organization.

4.  Better risk mitigation

Increased market volatility, people defaulting on agreements, lack of credit availability etc. Are common characteristics of economic downturns. And because of these conditions, it is likely that contract risk will increase manifold.

To derive maximum benefits from a contract, it is essential to monitor them throughout their lifecycle by identifying risks posed by the contract and including terms and conditions to protect your business from any impending threat of monetary loss. This is especially important for the volatile times we operate in today.

There are separate departments in large organizations that work dedicatedly to monitor and assess risk in their contracts. And for an organization of sizeable revenue, this is a huge drain on both time and money. And worst of all, manually tracking contract risk is error-prone and can leave your contracts vulnerable to risks.

For an efficient solution to risk assessment, it is worth looking into CLM tools on the market. Zycus’ Merlin Insta Review helps identify risk associated with contracting parties along with suggestions to mitigate these risks. This can help you take proactive measures, for example: if any of your suppliers are facing bankruptcy (financial) risk, operational risk, catastrophic risk, reputational risk etc. You can find a timely alternative.

Teams can generate metrics about the contract process and risk exposure and set benchmarks and track important KPIs demonstrating that the house is in order.

CLM software can also help reduce the risk of contract disputes by providing a clear and auditable record of contract negotiations and agreements, as well as by automating contract language and clause selection to ensure compliance with legal and regulatory requirements.

5.  Saved time and resources

CLM’s greatest benefit to organizations is enabling them to do more with less. And while this is always an attractive selling point, it is even more appealing in the face of recessionary budget cuts and organizational restructuring.

According to a survey by IACCM (International Association for Contract and Commercial Management), companies using CLM software reported an average cost savings of 27% on contract management processes. The same survey found that companies using CLM software reported an average time savings of 56% on contract review and approval processes.

This becomes possible because with the help of the right CLM software, organizations can significantly cut down on their contract cycle time, along with cutting down on risk and contract disputes. This leads to an overall reduced cost for handling and managing contracts.

Automating contract workflows can help to reduce the administrative burden on your team. This not only saves time and resources, but also helps to ensure that all contracts are handled consistently and accurately. To effectively automate contract processes, it is important to consider a variety of factors, including existing technology tools and potential areas for improvement. With the right approach, contract digitization can help your in-house legal team stay competitive and efficient during any economic downturn.


To answer the question of why CLM software is critical for weathering a recession, the answer is, that it arms you with five levers that can be used to fight recession, and these are:

  1. Complete information w.r.t your signed agreements (Visibility)
  2. Increased speed of decision making
  3. Heightened control
  4. Ability to get ahead or risks
  5. Saved time and resources

So, in essence, with a CLM solution on board, you are more aware – in control, agile and ahead of the (risk) curve all while saving up on limited time and resources.

As an in-house legal team, it is essential to carefully consider your approach to contract automation. While economic downturns or recessions can lead to reduced spending on technology, it is important to focus not just on overall spend but also on the cost of failing to digitize routine contract processes.

And while there is no way to predict the future with absolute certainty, contract digitization can help businesses mitigate some of the risks associated with economic uncertainty. By digitizing contract management, businesses can improve efficiency and streamline processes, helping them to adapt and thrive in changing conditions. Whether or not a recession is looming, contract digitization is an effective tool that all businesses should consider. If you would like to know more about how a CLM software can help your business, please click here to request a demo with our solution experts.


Willam Dyer is the Regional Vice President at Zycus, a leader in the Forrester Wave for Contract Lifecycle Management. William has spent more than a decade advocating CLM solutions for enterprises across geographies, making him a domain expert. He has successfully delivered ROI to numerous clients comprising legal leaders for Fortune 500 companies spanning different industries. In this stint in Zycus, his mandate is providing value and making a business case for global enterprises in the scope of a sales leader. His attention to detail and product expertise makes him the go-to person to strategize go-to-market plans.
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