The world is still learning many lessons from the COVID-19 Pandemic, some that will change the global economy forever. One thing that will remain true is that a robust contract management strategy paired with reliable technology can get businesses through unprecedented times without ending corporate deals or thwarting operational oversight. This blog post details Gravity Stack’s experience navigating the COVID-19 Pandemic alongside their client. The message we hope to share is that with the right people, process, and technology in place, your organization can also overcome these unique challenges.
All eyes on force majeure
The COVID-19 Pandemic has disrupted businesses in a way we have never seen before. Crumbling supply chains, unpredictable production schedules and halted logistics operations are forcing companies to make extremely tough decisions very quickly. Many are beginning to fall behind on their contractual obligations, and for the first-time investigating force majeure and related contract provisions that could provide some relief for one or both parties. At a time when disruptions are inevitable, it is critical for companies to quickly assess their level of risk within their contracts. A swift yet mindful examination of force majeure language is essential. However, even if a force majeure clause is present, there are other important considerations to understand; the analysis of triggers, notifications, and definitions are necessary to prepare for the next storm brewing: post-pandemic litigations.
Reacting in real time
While in the midst of a contract portfolio review, Gravity Stack and their client (a multi-national electronics corporation) suddenly found themselves in an unrelated crisis. The COVID-19 Pandemic was causing significant production delays for not only the company, but many of its vendors and suppliers as well, creating a massive web of defaulted contractual obligations to sort through.
The global conglomerate turned to the Gravity Stack team for guidance in a COVID-19 strategic workflow for over 8,000 already processed contracts. Using their own suite of end-to-end review solutions (powered by Heretik), Gravity Stack was able to report on the variations of the force majeure clauses within the collection, auto-assemble draft written notifications when required, evaluate the risk of defaulted obligations as a result of no applicable language, and prioritize contracts for further review that may prompt litigation. The use of Gravity Stack’s tools reduced several weeks of work to only one day. As a result, the client was able to significantly reduce economic loss to the business as well as prepare them for any future risks that may result from the uncertainty of the COVID-19 Pandemic.
So what happened?
Gravity Stack is known for putting a data-driven focus on their clients’ key legal challenges, and this situation was no different. Having an existing data intelligence partner like Gravity Stack readily available (and already structuring this clients’ contracts) allowed them to instantly and intelligently pivot their project. In less than a day, they provided their client actionable data that will ultimately save them millions of dollars while also minimizing impacts to their business and team, now and for the remainder of this unforeseeable event. So, how’d they do it? Keep reading to find out!
Tech-enabled review turns insight into action
Gravity Stack applied their suite of end-to-end review solutions (powered by Heretik) on this project. Some of the key Heretik features used in this critical review include:
If you are interested in learning more or seeing a full demo of Heretik’s proven force majeure model, click the link below!
A deeper, strategic analysis of force majeure is essential
Since the client’s agreements were already being reviewed, Gravity Stack was able to use Heretik to auto-segment contracts at a clause level, and then quickly see which contracts had force majeure language and which did not. On this particular project, they found 88.9% of the agreements had force majeure language and needed further review of things like event classification and definitions, each party’s liabilities, notification terms, risk assessment, and more.
A surface-level force majeure analysis is essentially useless. The next logical step is to analyze the liability counts for each party, risks within specific subsidiaries, as well as a breakdown of notification requirements and timelines. Gravity Stack quickly reported several actionable insights from their findings in figures 1.2, 1.3, and 1.4 below.
Once there was a clear understanding of responsibilities between all parties, the next step in the review was to understand breakdown of force majeure classifications as well as an overall litigation risk assessment of the documents. Keep in mind all this information was extracted and shared with the client in less than a day with Heretik’s contract review solution. They are now able to prioritize additional review, take action on with their contracts, and ultimately make the most informed business decisions in a time of unprecedented uncertainty.
Over the next several months, businesses will continue to shift from a reactionary phase to one of recovery. The first step to making the actual first step in organizational recovery is to understand the risks and obligations within your current agreements. Structuring contract data will allow for quicker and more intelligent decision making in the short-term, while creating a foundation for strategic crisis management in the long term. Heretik and all of our partners are ready to help any and every organization take that first step when they are ready to do so.
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Sarah is the Director of Marketing at Heretik. Prior to Heretik, she worked as a freelance branding and design consultant. Sarah began her career in advertising, working for brands like Nike, Verizon, Fireball, Coca Cola, the NFL, and more.