How to use RAG Status in Vendor And Contract Lifecycle Management (VCLM)

The ability to effectively track, monitor and mitigate any risks associated with both contracts and vendors is the key to business continuity.

We’ve previously written about a number of elements that help to reduce contract issues and risk. There are plenty of moving parts such as:

• Recording all agreements and metadata in a contract repository software to improve visibility
• Sharing understanding of contract obligations across the organisation
• Monitoring vendor performance against a defined set of KPIs
• Ensuring contract compliance across the entire portfolio

Gatekeeper’s comprehensive reporting suite enables customers to track all aspects of their contracts and vendors.

In addition to these configurable reports, Gatekeeper also allows customers to make use of what we term “RAG Status” or Red / Amber / Green across their accounts.

This flexible methodology can be applied in a variety of ways to contract and vendor records to give your users a greater level of understanding and to provide focus for where action should be taken.

In this article, we explore what RAG Status is and how it can be applied within Vendor and Contract Lifecycle Management (VCLM).

What is RAG Status ?

RAG is an acronym that stands for Red, Amber and Green and is based on a traffic light system. These colours, like those in (UK) traffic lights, are used to denote the status of a contract or vendor in a way that relates specifically to your business objectives and priorities.

RAG Project Status in Vendor and contract management 

Below is an example of how a RAG Project Status can be applied in contract management: 

• A Red Status could represent a lack of compliance as a result of expired documents
• An Amber Status could indicate that documents are reaching their expiry date and there is potential for non-compliance
• A Green Status could indicate that all documentation is up-to-date. 

Below is an example of how a RAG Project Status can be applied in vendor management:

• A Red Status might signify major issues with a vendor, such as significant delays in delivery or breaches in service level agreements.
• An Amber Status could indicate cautionary signs, like a vendor's recent performance dip or minor issues in meeting contractual obligations, suggesting the need for closer monitoring.
• A Green Status would represent smooth sailing, where the vendor consistently meets or exceeds expectations, maintaining excellent service and delivery standards.

How does RAG Project Status work?

RAG Status provides your business with a summary of information. At a basic level Green means good, while Amber and Red colours alert you to the fact that action is required in some way.

It is not enough to simply apply colours to different scenarios across the contract and vendor portfolio. A RAG Analysis and Action Plan should also be defined to turn Reds and Ambers and Ambers into Greens. This will create accountability across the business to take corrective action as soon as possible. RAG Status reporting will allow business to keep track of issues and remedial action. 

RAG Status applied in Gatekeeper

How to define RAG Status within your business

The subjective nature of RAG Status is what makes it so widely adopted across Gatekeeper’s customers. How you define each warning colour will depend entirely on what your business’s priorities are and whether you’re working at a vendor or contract level.

RAG Status can be applied to entire contracts or vendors, but it can also be applied to more specific areas such as:

• Risk levels
• Budgets and spend
• Contract reporting
• Performance status
• Criticality to the business

For RAG Status methodology to have true meaning throughout your business, there needs to be agreement about what defines each alert level and the actions that should be taken off the back of it.

Adding a RAG Narrative to each Status can help to justify responses, build trust around the methodology, establish understanding around risk mitigation efforts and standardise internal processes when actions need to be taken.

RAG Project Status examples

At Gatekeeper, we work with customers who use the subjective nature of RAG Status and apply it in completely different ways. The colour-coded system can also be used differently at the vendor and contract level too. We’ve outlined some RAG Status examples that are applied most commonly by the business we work with.

RAG Status for contracts

Rag Status for Vendors

How to use RAG Status within Gatekeeper

Many businesses that are familiar with applying RAG Status to vendors and contracts captured in spreadsheets will make use of manual conditional formatting and spend time communicating the changes to relevant teams before any issues can even be escalated, let alone resolved.

RAG Status applied within Gatekeeper creates a far more seamless experience thanks to automation.

A RAG Status that is Amber or Red can be used as a Workflow Trigger within Gatekeeper’s Kanban Workflow Engine. Any of the use cases outlined above can be used to automate entire internal processes where appropriate action needs to be taken.

A notification can be immediately sent to relevant team members and stakeholders when an issue occurs and a RAG status is applied or changed, preventing any delays in escalation and protecting the business from increasing contract or vendor risk.

Any actions that are taken will be captured in a defensible audit trail, making it easy to see how and when an Amber or Red RAG Status was addressed, while creating accountability across the business.

If you want to know more about applying RAG Status to your contracts and vendors, how Gatekeeper can support your risk mitigation efforts or how to automate escalations, contact us or book your Gatekeeper demo today.