Blog: Why AI Will Take Over for Contract Review and Contract Management
Contracts are like the engines of businesses, driving growth and containing mission- and business-critical obligations and opportunities for organizations. But still, firms continue to struggle to do something that sounds so simple: connecting contracts to business value. Just take a look at the opportunities that can be lost in a typical Fortune 1000 company that manages between 20,000 to 40,000 active contracts at any given time. Legal Tech News says at least 10 percent of contracts are misplaced and hard to find, or that still remain in paper form, buried as an attachment in an email, or on a file share somewhere.
The sheer volume of contracts that any given company has to contend with on a daily basis is staggering. Contracting is indeed a common activity, but it’s also one that few companies can handle efficiently or effectively. In fact, inefficient contracting is estimated to cause firms to lose between five and 40 percent of value on a given deal, according to the Harvard Business Review. However, that’s all changing drastically thanks to recent technological developments in the form of artificial intelligence (AI), which is helping companies overcome many of the challenges that come with contracting.
For one, AI solutions can activate important data in your contracts across your organization, in any number of industries, from legal and finance to sales and operations.
Challenges Facing Companies Today
The main challenge firms like yours may face in contracting stem from the huge numbers of contracts you have to keep track of. Not only do they lack uniformity, they’re hard to organize, manage, and update. Most firms don’t even have a main database in which to keep all the information in their contracts — let alone have an efficient way of extracting all that data. It’s nearly impossible to view complicated and detailed outsourcing agreements, determine how a certain clause is worded across various divisions, or locate renewal dates and renegotiation terms.
It involves a lot of manpower to draft, execute, improve and update not just the actual contracts themselves, but the contracting processes and transactions all those contracts oversee.
When using advanced software with AI capabilities, firms can see a big boost in productivity and efficiency in their contracting. In fact, the use of AI contracting software can improve how all firms contract in three main ways:
· By changing or enhancing the tools firms utilize to contract
· By influencing the content of contracts
· By impacting the processes by which firms contract
The AI Solution
Let’s say you’re a large tech company and you have a staggering volume of procurement contracts on your hands, all with different renewal dates and renegotiation terms. If you look at it objectively, this would require hundreds of hours and a team of contract managers to not only review them all but to also find a way to effectively track all the information to ensure that no renewals or opportunities go unseen.
Do you have that kind of money, time or resources? Probably not.
AI software, on the other hand, can:
· Easily extract data and clarify content.
· Quickly pull and organize renewal dates and renegotiation terms.
· Allow you to review contracts quickly.
· Allow you to organize and find huge amounts of contract data more readily.
· Decrease contract dispute potential.
· Elevate the volume of contracts you are able to negotiate and execute.
The ability to effectively and consistently use data to gain insights is critical to any large business. It’s no wonder that AI is being applied to data search and information discovery in an effort to automate processing in business areas ranging from legal to human resources. AI can be used by businesses to effectively manage and gain insights from the data they have been collecting. Not only does AI help reduce the time it takes to process, it enables automation that directly improves efficiency in business operations.
Legal teams, for instance, should be spending their time negotiating high-value contracts rather than slogging through contract metadata. AI for contract management can:
· Identify, classify, and extract key clauses and terms: Easily search for specific or similar language in order for your team to make necessary changes.
· Identify risks and obligations within contracts: Pull up a contract and immediately view verbiage that has been tagged yellow or red for review.
· Recommend or swap out terms from clause libraries: Quickly replace or switch out terms with language pre-approved for use.
· Predict risk that comes with new regulations in order to recommend amendments to renewals: Identify terms and key clauses that could introduce risk and replace them with suggested amendments designed to protect your business.
As another example, corporate legal and HR teams at larger firms handle thousands of contracts every day, including data from:
- Customer contracts
- Supplier contracts
- Merger and acquisition contracts
- Real estate contracts and deeds
- Healthcare claims or contract documents
- Sensor data for industrial machines
- Vehicular data for heavy industry fleets
- Raw material supply orders and invoices in construction industry
- Data concerning enterprise employees and corporate hires
The value proposition for AI search is the ability to process large volumes of incoming and legacy enterprise data with a reasonable accuracy level while at the same time reducing how long the process takes. AI can help companies such as the above leverage contract data to improve common business functions.
Evisort is at the cutting edge of AI technology for contract review and contract management. Get in now to start improving your business operations and start realizing a stronger bottom line. Contact us or request a demo online.