The uses of artificial intelligence when managing legal contracts
Legal contracts constitute the foundation upon which the dynamic processes that empower organizations and their interactions with each other transpire in the world of commerce. Contracts move through different stages from genesis to execution and expiry. The material manifestation of the contract object is usually a document, which is manually processed, printed and signed to formalize the contract. Managing the documents as well as monitoring the compliance of the process to that outlined in the contents of the contract are onerous tasks and have many unseen gaps.
Along with guiding the interaction in terms of obligations and entitlements, the contract objects encode the perceived risks and remedial strategies associated with risk management. Which makes contracts integral to directing the activities of many different parts of the company and requires visibility across the organization.
Technology aids in management of this critical aspect of the business effectively by moving from manual material management to a digital process. A centralized repository for all the contracts of a company improves contract management efficiency and provides visibility into the risks and possible resolutions across the organization.
By establishing a single source of truth for the rights and commitments a company holds in its contracts, contract management software greatly reduces the risk of missed deadlines, opportunities and penalties—or worse, litigation.
Managing the lifecycle of complex contracts becomes simpler by the use of these platforms. But to truly improve business operations through contract management, organizations today are turning to even newer data-driven technologies that can help them make intelligent, proactive decisions that maximize their commercial relationships and opportunities.
AI’s Role – Accuracy, speed, and insight
Artificial intelligence (AI) driven contract intelligence can provide many insights that drive optimum performance throughout the life of a contract, from its initial negotiation and approval, through execution and performance to its completion and renewal.
Consider the case of location data and platform company HERE Technologies. HERE was managing 70,000 contracts in non-digitized, unstructured forms which represented a wealth of data that could not be easily accessed, acted upon, or shared across the organization. But after implementing a contract management platform to digitize the legacy contracts whose AI engine helped the company to not only centralize its contract data, but to identify attributes and clauses, and semantically match them to the contract type and definitions that HERE had previously established. The power and accuracy of the intelligence derived from AI accelerated the entire digitization effort by months, empowering HERE’s employees to make better business decisions when managing their contracts. HERE’s sales teams gained deeper insights into past customer contracts, which allowed them to make proactive decisions on renewals, up-sell, and cross-sell, thereby increasing revenue and accelerating contract turnaround time.
These AI engines convert contracts converted from unstructured documents to analyzable digital assets in a matter of minutes.
These advanced technologies provide the insights needed to accelerate commerce, mitigate risk, preserve cash flow and negotiate optimal future contracts while boosting productivity and reducing operational costs by using fewer resources. It can also reduce time spent manually authoring and reviewing lengthy contracts and ensure compliance. More organizations are poised to adopt this technology to benefit from contract best practices across the organization and speed up the negotiation process by providing the right insights at the right time.
While there are many positives, it is important to recognize that AI is not a panacea. Because of its inherent automation, AI will inevitably change the content of contracts to make them consistent organization-wide. This will ultimately impact the overall contracting process. It will influence the current roles of people responsible for, or involved in, creating, executing and overseeing contracts. Organizations may expect to be able to reduce their resource requirements, but rather than eliminating positions, roles will likely shift or transform. This allows teams to focus on strategic functions such as building relationships with prospects or providing counsel.
Setting the course
An effective federation of filtered information is necessary to extract useful intelligence that can feedback into process optimization. A data driven approach to understand current limitations, demonstrate results, and align any necessary training or organizational changes forms the core of a successful adoption strategy. Done right, AI for contract management has the potential to empower organizations to stay out front by turning repositories of contracts into indispensable strategic advantages.
Author: Sunu Engineer