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Mitigate Cyber Security Risk with Contract Management

from  January 17, 2024 | 5 min read

Threats to cyber security come from both inside and outside the organization, but cyber security incidents that happen outside of the organization are outside of your control. Contractual agreements with other parties, including those throughout your supply chain, are perhaps the biggest vulnerability because we are as reliant on other parties to do their own due diligence and data protection. These liability issues mean that cyber security should be an important consideration in any partnership or contractual agreement.

Vulnerabilities of Cyber Security

Cyber attacks reported over the past decade have proven that such incidents can have a significant impact on stock price as well as causing devastating reputational damage. These data breaches can involve commercially sensitive information that leads to a loss of important intellectual property – all of which is of high value, due to its potential for future increases to revenue. Everything from tax information, employment records, point of sale data, and contract documentation is at risk. There is also the very likely consequence of costly legal actions, as other parties impacted by the data breach in question seek compensation and restitution for losses and damage incurred.

Contract Management as a Defense Strategy

Contract management can play a key role in your strategy against breaches in cyber security. Commercial organizations benefit from the adoption of a three-point policy that is structured around ‘three Rs’:

1. Readiness

In the event of a cyber attack or data breach, your response in the immediate aftermath must be  informed by contractual language that pertains to data protection and cyber security. If the incident occurs through a third party, your expectations of their immediate actions and responses are informed by a contractual agreement as well. Once you know the content of your contract portfolio, you can put that knowledge to work to bolster your cyber security provision. First, you identify the types of data that are particularly vulnerable either by theft or accidental internal data breaches. Steps can be taken to tighten restrictions on access as well as the standardization of clauses. Remedial action can also be taken in the form of additional training or adjustment of system workflows.

2. Responsibility & Accountability

Perform a comprehensive review of your contract clauses to assess risk and potential exposure of data breaches, both internally and within the supply chain. This risk assessment should be completed from a technical and contractual perspective. The knowledge gained from this process further enhances readiness, but also allows your organization to clearly define the obligations of all parties in the event of a cyber security incident. You can assess the clauses and terms already in place and ensure they include clear statements about how data will be handled in the normal course of business, how long it is stored, and what happens to it once the contract is terminated. Where these terms and clauses are not included, remedial action can be taken. 

3. Recovery & Review

An important part of the overall recovery process is the speed at which you react to an incident. A swift response can repair reputation damage, consumer confidence, and share prices. The language curated within your contract portfolio applies here. Provide a comprehensive framework of obligations and responsibilities pertaining to each affected client and business area. Once your immediate incident response process is in motion – including all necessary forensic investigations and the removal of affected data – it is time to undertake a thorough review. Determine the lessons learned and agree on a pathway to improvement. Once again, your contract portfolio plays an important role here because it provides a documented overview of your commercial relationships.

Contract Management Software as a Cyber Security Solution

The very best contract management software packages include features  to deliver precise results needed to bolster your defense against criminal cyber attacks and the effects of data breaches within your supply chain.

A Centralized Repository

Having your entire contract portfolio centralized with a cloud-based software package enables you to search for specific terms and clauses pertaining to cyber security and data breaches. This informs and shapes your response to any cyber security incident, and also provides the opportunity to tighten up and standardize language where necessary, to provide greater protection going forward.

Data encryption

Ensuring that all transferred data is encrypted provides the very best protection and privacy for your data. This is particularly important in terms of compliance with industry standards, with contractual terms, and with your own corporate governance.

Permission-Based Access Control

While the cloud-based approach of Contract Management Software provides the convenience of secure worldwide access through any browser on an internet-enabled or mobile device, the permission-based access control feature provides the additional security of log-in restrictions. This means that access is only granted once permission is given by authorized personnel, and all access and activity within the software is tracked, documented, and auditable. 

Customizable Reporting

Identify vulnerable data and language pertaining to cyber security and data breaches by running reports using specific terminology. Undertake risk management exercises with ease and implement remedial actions where necessary. You can also standardize language and protections throughout your contract portfolio while maintaining a clear and detailed record of revision histories.


All these features use a high degree of automation, so protecting your business consumes far fewer resources. Contract management software solutions are designed with the optimization of workflows in mind. Automating these search and identification processes streamlines the process and saves time. Moreover, by reducing the need for staff to be handling data, the risk of accidental data breaches is significantly reduced.

In today’s global economy, commercial organizations are more connected to their suppliers, customers, and competitors than ever. Your contract portfolio is the hub through which all business and consumer relations flow. While your contract portfolio offers great potential for strength, it is also opens up risk by virtue of third-party connections. So, deploy these features in your contract management solution to send a clear sign to all parties that the protection of data is your highest priority. 

Dan Townsend

No Longer with Scanmarket

Dan has been a leading executive across all areas of Contract and Compliance Management applications since 2001 in both Sales and Implementation. Dan has over 30 years management experience in a wide range of business applications such as ERP Implementations, Business Process Reengineering, and Operations Management.

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