Contract security is the practice of taking reasonable steps to protect a contract against unintentional or unauthorized disclosure, modification and destruction. It is an issue that any company that relies on contracts to do business will be concerned about.
In this article, we'll discuss everything you need to know about contract security so you can reduce your own risk when signing contracts with vendors and customers alike.
Why most businesses fail at contract security?
It's pertinent to consider that contract security fails in most organizations today because they are seen using general-purpose shared drives for contract storage. They don't provide adequate guardrails on access controls for team members. They can thus potentially expose sensitive contract information, eventually resulting in security vulnerabilities.
What is contract security?
Contract management security is a collection of methods and processes which ensures contract information is accessible only to required or eligible team members. Contract security measures help you protect sensitive data stored in contracts, thereby ensuring you remain compliant with various data privacy laws and safeguard your business’ best interests.
Contract security threats can be classified into internal and external risks. If left unchecked, these threats ultimately pave way to legal liability or damage your reputation. Rightly implemented contract management security helps you protect contracts from hackers, eliminate data breaches, and avoid unauthorized access.
Do you need to prioritize contract security more often?
Businesses need to approach contract security according to the nature of their agreements. Often, your contract type dictates the level of security needed - it may not be necessary to protect a simple T&C (Terms and Conditions) agreement the same way you would protect a shareholder agreement. The latter contains sensitive financial information that you would like to keep private.
“Contract access to unnecessary stakeholders always puts the business at risk. Infact, organizations end up paying lumpsum amounts or huge liabilities in the wake of security breaches.”
Supin Prem, Senior Manager, Legal Tech
Common techniques for protecting your contracts
Below are four methods you can use to secure your contracts. Now let's dive in.
Centralized electronic contract storage
Do you remember that your contracts get dispersed among many file cabinets and folders? A crucial step in ensuring contract security is creating an online and centralized repository. A cloud-based contract database curtails unnecessary access.
Role-based permission to contracts
You could reduce risk and protect sensitive data by ensuring only key stakeholders have access to the information and contracts they need to perform their duties. Setting role-based access controls augments security. That means certain contract types are accessible to a specific set of users, thereby trimming down unauthorized usage.
AES 256-bit encryption
Another significant step your company could embrace is to encrypt all contract data at rest and in transit. Encryption prevents malicious attacks, whether stored in your server and transferred to or taken away from your contract lifecycle management (CLM) solution.
Fully encrypted signatures also allow you to detect any changes made to the contract after signed. Moreover, e-signatures are more secure and swifter than paper-based ones, as the former supports audit logs.
The e-signature regulations that SpotDraft complies with include ESIGN (USA), eIDAS (Europe), and ECA (UK). To learn more about SpotDraft e-signature software, click here.
“We've been using SpotDraft for most of our contract flow and signing. It has made getting agreements out for signature much easier.”
Contract security features your CLM should have
A CLM should have these seven features to ensure contract security. Let's skim through the list.
- Make it impossible for illegitimate users to access sensitive data by fully encrypting contract data at rest and in transit.
- Consider CLMs that are SOC1 and SOC2 certified. Doing so ensures that your customer's data is handled with care and is protected. Click here to learn more about SpotDraft's SOC2 Type 1 Audit completion.
- Cloud-hosted CLM platforms enable you to stay compliant with the latest security standards. So, pick the most appropriate ones and monitor org-wide contract management software usage.
- Set and grant permissions to contract administrators or business users based on their role, department, contract value, and contract type. Role-based access enhances contract security. For instance, only employee contracts might need to be seen by your HR department.
- Performing quarterly penetration and vulnerability tests expose security risks that remain largely unnoticed. Make sure your CLM partner or vendor takes audits seriously.
- A detailed audit trail records all contract-related communications, versions, and user interactions. This feature helps contract administrators and business users to maintain compliance and meet internal policies.
- You should ensure that your CLM vendor integrates with other cloud storage and e-signature tools you are already using.
How SpotDraft boosted contract security for a SaaS customer
As part of one of our SaaS client's contract management risk strategy, they ensured stakeholders only had access to the data and contracts they needed to do their jobs.
With SpotDraft, they were able to keep and leverage detailed audit logs and control access to the system according to roles, departments, and much more. Also, they automatically recorded changes to contracts before, during, and after they have been signed.
Additionally, they created granular roles and permissions on contracts and ensured that certain contracts were only visible to specific teams. It made contract creation and editing error-free and helped mitigate risk.
Notable results: Having an audit log of all work done in a contract helped them understand how their team could be more efficient. It was easier than ever to keep track of a contract's stages, and they were always up-to-date.
Thus, security is a vital aspect of assessing and evaluating CLM solutions. Malicious hacks and data breaches are increasing dramatically. As contracts are the basis of your business, implementing these practices will increase contract security. You'll not only feel more at ease, but you'll also stay away from the potential brand, financial, and legal risks.