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For many IT Services organisations, annual customer contracts make up a significant portion of revenue, but renewals often turn up nasty surprises in the sales forecast when it's too late to do anything about them.
Our Contract Risk Framework is designed to help organisations assess the level of risk associated with their ongoing contracts, identify the biggest revenue risks and develop actions to address them ahead of time.
PROCESS
The process sees us identify the relevant contract data in your systems, run that through our analysis model, review the output with you and start planning and prioritizing appropriate actions.
The data can be anonymized prior to the analysis taking place, protecting customer confidentiality if required. This approach can also be useful in conducting a 'blind' analysis of the contracts, avoiding any biases that may exist which may influence action planning and prioritization.
The analysis can then be repeated on an annual, quarterly or even monthly basis depending on the volume of contracts you're renewing each month.
RISK WEIGHTED VALUE
We undertake a multi-dimensional review of all risk factors affecting your contracts to establish a 'risk weighted value' for each, which can be aggregated into a total risk weighted value for the whole contract base.
We look at organisational norms like contract churn rate and renewal price change to estimate their effects on upcoming contract renewals.
You probably maintain some data about the sentiment of your customer base. Some of it may be highly structured (like NPS survey responses), or just an informal 'flag' on a customer contract.
We then mix in a broader set of economic data which may act as a tail or head wind on renewals. This includes sectoral performance data and more general economic factors in the markets you sell to like GDP growth and Inflation.
TIME CRITICAL PLANNING
The single biggest cause of avoidable contract loss is not taking the right action at the right time. We've all had that moment of reflection where we realise that if we'd have just picked up the phone a month earlier, or made a different decision on a price adjustment or spotted that we had an unusually large number of renewals in a month when a key member of staff wasn't available, we'd have avoided a contract loss or two.
One of the primary aims of the Contract Risk Framework is not just to identify the level of risk in any given contract, but to help you formulate a plan that looks at those critical timing factors so you can proactively secure contract revenue.
VISUALIZATION
Core to the Contract Risk Framework are the different views we can deliver from our analysis. As your organisation becomes more familiar with the Contract Risk Framework, you'll get comfortable with terminology like 'Risk Weighted Differential' and our analysis will turn the language your organisation uses to discuss, understand and respond to the risks across your entire contract base.
Our visualizations are designed to help your organisation understand what matters, why it matters, when it matters and how much it impacts you.
RISK IN LARGEST CONTRACTS
For many organisations, a significant portion of their annual recurring revenue is locked up in a relatively small number of larger contracts.
We provide a visualization of all of your biggest contracts and their corresponding risk weighted value so you can make an at-a-glance determination if any further action is needed with any of them.
CONTRACT TAIL VISUALIZATION
There is huge variation in make-up of every organisation's contract base. Some have small handful of larger contracts, others have a massive number of small value contracts, some have a blend.
Being able to visualize all of those contracts alongside their 'remaining' revenue and risk weighted differential helps when planning and prioritizing your interventions.
RISK WEIGHTED VALUE DIFFERENTIALS
One of the key benefits of the Risk Weighted Value metric is that it allows you to combine two dimensions of risk (which of our contracts are most at risk, and which of our contracts are worth the most) in way that means you can quickly see which of your contracts are carrying the biggest potential drop in their risk weighted value.
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