In an era when retailers face unprecedented challenges from organized retail crime—with 93 percent more shoplifting incidents since 2019—loss prevention professionals are rightly focused on securing merchandise and protecting stores. Yet while visible theft captures headlines and attention, an equally significant source of leakage often flies under the radar: poorly managed vendor contracts and supply chain relationships.
The retail industry’s intense focus on store-level security has inadvertently created a blind spot around vendor relationships. According to Deloitte’s Extended Enterprise Risk Management survey, 84 percent of organizations have experienced third-party incidents in recent years, with each incident costing significantly more than internal breaches.
“Many retailers focus exclusively on shoplifting and internal controls, but vendors present a major risk surface that’s often managed through outdated manual processes,” explains Matt Lhoumeau, CEO of Concord, which aims to help companies modernize their contract management.
These vendor risks manifest in multiple ways:
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Contract pricing discrepancies that go undetected for months
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Auto-renewals triggering unexpected charges
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Compliance violations resulting in regulatory penalties
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Supply chain vulnerabilities exploited by organized retail crime
The scale of these threats is not small—a recent National Retail Federation report notes that supply chain exploitation is becoming a primary vector for retail crime operations, with cargo theft reaching unprecedented levels in 2024.
Why CFOs, Not Legal Teams, Should Own Contract Management
Traditionally, contracts have been considered legal documents managed by legal departments. This paradigm is changing rapidly, especially in retail.
“At the end of the day, a contract is not a legal document,” Lhoumeau argues. “A contract is a business process. It’s the most central business process you have in a company. Whether you buy something, sell something, hire someone—there is always a contract in the middle.”
This revelation has led forward-thinking retailers to shift contract ownership from legal to finance departments, with CFOs increasingly taking the helm. A McKinsey analysis found that companies with finance-led contract management achieved 5 to 10 percent cost savings compared to legal-led approaches.
The shift makes strategic sense; while legal focuses on risk mitigation language, finance teams concentrate on capturing value, improving visibility, and creating financial controls—all critical for loss prevention.
3 Ways Automated Contract Management Prevents Retail Loss
1. AI-Powered Vendor Risk Profiling
Modern contract lifecycle management (CLM) platforms employ AI to analyze contracts and identify risk patterns that humans might miss. The technology can flag unusual terms, compare agreements against standard templates, and even predict vendor performance issues before they impact operations.
Gartner research suggests that by 2024, organizations using AI-enhanced contract analytics will reduce their annual supply chain costs by 50 percent by identifying leakage, overbilling, and compliance risks.
For retailers, this means the ability to quickly identify which vendors pose the greatest risk for fraud, noncompliance, or service disruption—critical intelligence as organized retail crime groups increasingly target supply chain vulnerabilities.
2. Automated Compliance Monitoring
Retail compliance failures are not just expensive—they often open doors for more significant losses. According to KPMG’s Fraud Barometer, regulatory fines frequently follow breakdowns in compliance monitoring.
“The compliance change that AI is just accelerating didn’t create it per se,” said Lhoumeau. “The second thing that AI is really helping with right now is just being able to review big volumes of contracts and really get data out of this.”
Modern CLM platforms automatically track obligations, renewal dates, and compliance requirements—eliminating the manual spreadsheets still used by many retailers. When paired with automated alerts, these systems ensure nothing falls through the cracks while freeing loss prevention teams to focus on more strategic initiatives.
3. Centralized Repositories Prevent ‘Ghost Vendor’ Fraud
One sophisticated fraud scheme involves “ghost vendors”—fake or compromised supplier accounts used to siphon funds through seemingly legitimate transactions. The Association of Certified Fraud Examiners reports that such schemes account for more than 21 percent of business fraud cases.
Centralized contract repositories create a single source of truth for all vendor relationships, making it significantly harder for fraudulent vendors to infiltrate operations. By enforcing approval workflows and maintaining comprehensive audit trails, these systems create transparency that deters both internal and external fraud attempts.
Implementation Steps for Retailers Start with High-Risk Categories
Rather than attempting enterprise-wide implementation, focus first on vendor categories with the highest risk profiles:
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Merchandise suppliers (especially high-value categories)
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Transportation and logistics partners
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Technology and data service providers
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Facilities management vendors
A Risk Management Association study found that targeted implementation in high-risk areas delivered 60 to 70 percent of the total benefit while requiring only 20 to 30 percent of the resources of full-scale deployment.
Leverage AI for Historical Contract Analysis
Before implementing new processes, use AI to analyze existing contracts for vulnerability points. This retrospective analysis often reveals:
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Unfavorable auto-renewal terms
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Missing service-level agreements
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Inconsistent pricing structures
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Compliance gaps
Many retailers are surprised to discover the magnitude of these issues. A KPMG contract analytics study found that 77 percent of organizations uncovered significant risk factors they were not previously tracking.
Create Cross-Functional Oversight
Effective contract management requires collaboration between finance, loss prevention, operations, and legal teams. Consider forming a cross-functional committee with representation from each department to:
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Define risk prioritization frameworks
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Establish monitoring protocols
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Develop response procedures
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Share intelligence about emerging threats
IBM’s Retail Security Research indicates that organizations with cross-functional security teams identified breaches seventy-four days faster than those with siloed approaches.
The Future of Contract-Based Loss Prevention
As AI capabilities continue to evolve, the next frontier in contract-based loss prevention will be predictive analytics. Rather than merely identifying existing issues, these systems will forecast potential problems based on subtle pattern changes, giving retailers time to intervene before losses occur.
“I think AI is going to make it less and less of a legal problem and more and more of an operation problem for everyone,” says Lhoumeau. “And so I think you’ll see a lot of legal teams being reduced or sometimes just being entirely outsourced in most companies.”
This evolution mirrors what is happening across retail loss prevention, where advanced analytics and AI are transforming reactive approaches into proactive strategies.
Taking Action Now
For loss prevention professionals, the contract management opportunity presents a chance to expand influence beyond traditional security functions and into strategic business operations. Here are concrete next steps:
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Audit your vendor onboarding process for security vulnerabilities
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Assess whether contract ownership sits with legal or finance in your organization
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Identify your highest-risk vendor relationships for pilot implementation
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Quantify potential savings from improved contract management
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Build the business case for automation based on risk reduction and cost savings
The retail industry’s loss prevention challenges will continue to evolve, but one thing remains certain: a comprehensive strategy must extend beyond physical security to address all vulnerabilities—including those hiding in plain sight within vendor contracts.
By bringing the same analytical rigor and technology focus to contract management that has long been applied to shoplifting prevention, retailers can close a significant gap in their loss prevention strategy and protect their business on all fronts.
