How Covid-19 Fast-Tracked Innovation In Contract Compliance Auditing

By Federica Bowman, Global CEO, FirmDecisions

Market context

In the 20 years since FirmDecisions first made media contract compliance auditing an integral part of many leading brands’ system of checks and balances, much has changed in the marketing ecosystem. In that time, digital advertising has moved from the wings to centre stage; digital now accounts for more than half of all media spend. Linear live TV has lost its ability to deliver mass audiences at scale as a matter of routine. And static, paper-and-paste outdoor poster sites have become among the most dynamic and addressable forms of targeted media.

Some things, however, remained the same. And until Covid-19 attained pandemic status a year ago and Governments mandated their citizens to work from home, contract compliance auditing was routinely conducted in agency offices. Just like its older sibling, statutory auditing, contract compliance auditing required experts in marketing finance to base themselves in agency offices during the audit. There they interrogated paperwork and systems, questioning staff to assess the extent to which agencies had delivered on their contractual obligations. It was how it was done.

An electro-shock to the system

Like many sectors in the knowledge economy and service sector, the pivot to remote working in the contract compliance sector began with a short pause while all agencies, advertisers, and auditors worked out how they could turn such an in-person discipline into one that could work online. This was helped by the fact that so many brands paused, scaled back, or cut campaigns entirely. Within a very few weeks, contract compliance auditing was reinvented for life under lockdown.

Seamless transition but more time-consuming

FirmDecisions’ UK MD, Andras Vigh, explains: “In the past, our teams did everything on-site, in our clients’ agencies’ offices, whereas today everything is done online. If anyone had suggested we move to remote audits 18 months ago, we would have been told by agencies that this just wasn’t possible. But because the whole world changed overnight, the switch to auditing online has been largely painless, seamless, and trouble-free.”

FirmDecisions has observed that some aspects of running contract compliance audits online can take a little longer than on-site, while others can be fast-tracked. When auditors are based in agency offices, agency finance teams are prepared for ongoing discussions throughout the period of the audit; it can be simpler and more direct to ask “just one more thing” when you’re based in an agency office than to have to set up another video conference call or ask questions by email. Then again, any additional time eaten up by setting up meetings is easily offset by auditors not having to travel to agency offices – particularly for global or multi-market audits for bigger-spending advertisers.

Increased agility

With new ways of working developed by necessity, FirmDecisions has found that it is able to work in a much more nimble way than before, including deploying subject matter experts wherever they’re required, irrespective of where they live and work in the world. Global CEO Federica Bowman observes: “I have to say we’re in a very different place from where we were this time last year. We’ve now moved towards a remote audit structure for the vast majority of our clients. We are definitely more agile in the way in which we manage our audits. I think one of the benefits for our clients is that being able to perform remote audits also enables us to put the right people on the right projects, irrespective of location.”

The pandemic has forced FirmDecisions to look at everything it does and find better ways of delivering its services, including how consultants present their findings and recommendations, making the whole process more dynamic. Global Head of Operations, Jim Stroude, notes: “Covid has made us challenge all of the assumptions that we previously had around our processes. We’re applying all our resources and simple common sense and will end up with a better product.”

Focus on agency staffing and remuneration

As many advertisers have paused, cut back, or cancelled campaigns altogether, many agencies have changed the composition of their account teams as a result. Some staff members have been reallocated to work on other business, some have been asked to take a temporary leave of absence – known as furlough in the UK, with Government support covering a proportion of salary – while others have been made redundant. However agencies have restructured to mitigate lost revenue, brands need to compare the support they were promised under the terms of their contracts with the support they actually received. Assessing staffing levels remotely is one of the most challenging aspects of contract compliance auditing. Advertisers need to be sure they haven’t been paying for teams that are simply no longer in place.

Holding group margins have also come under pressure, most notably where revenue was based on benefits and bonuses received as a result of threshold levels of investment with media, technology, and data vendors, known as AVBs. In the past five years, many advertisers have made good progress with their agency partners in understanding the complexities of their own marketing supply chains and reset remuneration and bonus schemes. In wake of the chaos of Covid, they need to keep the focus on keeping financial models clear and transparent.

Looking to the future

Christine Moore is MD of FirmDecisions North America. She has observed that, with agencies, advertisers, and auditors all remote, the new way of operating is working well. The flexibility, agility, and spirit of collaboration that has so often characterised the last 12 months will be necessary as people start going back to offices and, in all likelihood, audits move to a mixed model – part remote, part in-person. She comments: “I do think we’re going to see some of the efficiencies we’ve experienced moving online staying with us for the long term. These include dealing with markets that are difficult to reach, where there’s a language barrier, and where – if you do run the audit remotely – it’s much easier to bring in global expertise that can really help drive the understanding on both sides.”

Summing up

Federica Bowman concludes: “It’s really important for me that we both maintain our physical presence in the market in the long term and at the same time strive to adapt our operating model to the changing marketing landscape – to the changing ways in which agencies operate, in which advertisers are working with partners in the marketing space. It’s vital that we stay agile and we adapt to new situations, Covid being the most extreme example most of us will ever experience in our careers.”