By Manpreet Dhillon, Head of Legal Digital Transformation, ContractPodAi
Contracts represent each and every company’s past successes, current obligations, and future opportunities.
As businesses grow, building relationships with new suppliers, partners and customers, it is only in their best interest to recall valuable lessons learned. To create contracts that foster trust, mitigate risk, and maximize profitability. This has never been more true than it is today – at this time of global crisis.
As businesses outgrow antiquated contract repositories and authoring tools, upgrading to using modern applications – those that combine contract management and artificial intelligence – is a critical next step. It accelerates the contract assembly process for sell-side contracts, fast-tracks buy-side contract review, and provides deep insights into a company’s performance across the organization.
Now, let’s look at three key benefits of AI-powered contract management in corporate legal and beyond.
1. Containing Costs
Large corporate legal departments generally manage more than 10,000 contracts annually. On average, the cost to generate those contracts is around $6,900 USD each. Highly complex contracts, on the other hand, can cost tens of thousands of dollars to create, especially when agreements are:
- Written in a complex language
- Contain multiple appendices and addenda
- Include elaborate terms written to absolve parties of any potential liability
- Subject to ongoing review by regulatory auditors
- Likely to extend through multiple renewal cycles
- The foundation of strategic partnerships or corporate acquisitions
Simply making contracts easier to read, less expensive to produce, and more standardized can improve the creation process. Yet, it all leaves businesses exposed to unacceptable levels of risk.
So, if simplifying and shortening contracts isn’t the answer, consider adopting AI as a way to augment and aid your contract management .
The automation of contract and document assembly instead leads to the quicker creation of contracts. It also reduces contract production costs and ensures that agreement terms are vetted, while protecting the company’s overall interests.
2. Managing Risks
Let’s face it, the accelerated pace of business and increased regulatory requirements for business transparency are ratcheting up pressure on corporate legal to review complex contracts much faster. Nevertheless, according to our recent Corporate Counsel Research survey, 62 percent of companies still use SharePoint, Excel, and email applications like Microsoft Outlook to manage contract data.
Just over a third of companies that we surveyed also said that their organizations view legal merely as a cost center. Nearly half told us that they haven’t evaluated a contract lifecycle management (CLM) solution in four years or longer. And almost 65 percent assumed that it would take at least a year to adopt and deploy an AI-powered CLM system. Quite clearly, they haven’t investigated quick deploy contract management options.
The fact is that using antiquated methods to manage contracts in the age of digital transformation causes undue delays, extends negotiations, or impedes contract managers’ productivity. It can even expose your business to unnecessary risks when contract terms cannot be compared against historical agreements easily. Add to that the wrong terms being used, or when clauses aren’t reviewed thoroughly enough.
The good news is that 48 percent of the corporate counsels that we interviewed said that they plan to adopt a CLM solution that includes artificial intelligence. Even more recently, the IACCM found that 81% of companies have plans to implement, replace or add contract automation, now that COVID-19 has forced so many legal teams to work from home. And 50 percent cited contract risk mitigation as their most important mandate for 2020. Now, if your competitors, partners, or customers are among those we surveyed, ask yourself if you want your business to struggle while playing catch-up in the coming years.
3. Transforming Contract Insights into Intelligence
As contract repositories mature, becoming stocked with tens of thousands of contracts, a powerful AI engine like IBM Watson can parse contracts and their metadata quickly to understand:
- How many contracts are up for renewal over the next few months or so
- The number of contracts that were – or weren’t – renewed for specific services, regions, or deal sizes
- How many contracts currently have a clause for ‘force majeure’ or other such terms,
- Who is viewing and approving contracts, or using eSignatures
The bottom line is that individual contracts are vital to a company’s future. So is efficient and effective contract management, particularly during periods of crisis. As such, fully understanding the historical trends of business’ contracts empowers executives to make data-driven decisions moving forward. Decisions like hiring new employees, modifying product or service offerings, or expanding into new markets. Interestingly, 74 percent of the contract legal professionals who we interviewed prioritized KPI metrics and advanced analytics in their own CLM evaluation.
So, have you hesitated to adopt an AI-enhanced contract management solution, for fear of an extended integration and deployment timeframe? Are your contract production costs climbing, or are you struggling to assemble documents and thoroughly review supplier agreement terms? Can you view contract performance data and make strategic decisions based on reliable insights?
Discover for yourself – right now – the difference that secure, intelligent, cloud-based contract management solutions can make in your corporate legal division and enterprise.
Manpreet Dhillon, a commercial lawyer by background, is the Head of Legal Transformation at ContractPodAi. She has in-depth knowledge of IT law with extensive experience in drafting and negotiating all types of agreements from IT to procurement and sales contracts. Read Manpreet’s full executive bio.
Legal Innovators Online Conference – May 19, 20 + 21
Manpreet and many other great speakers will be taking part in the Legal Innovators Online conference, which will be on three afternoons (UK time), May 19, 20, and 21. We start on Tuesday at 3.30PM. See you there!
The event is ticketed, to get your pass for all three afternoons, please follow this link.