Artificial intelligence (AI) offers an abundance of use cases in today’s business landscape. The development of AI is facilitated by constantly increasing computing power and large quantities of data. Also known as machine intelligence, AI is a branch of computer science capable of autonomously learning and performing actions on behalf of humans.
From product and service innovations to healthcare, there’s a function for AI across all industries. AI solves business tasks such as:
- Automating routine processes to cut costs and save time.
- Forecasting customer preferences.
- Providing the data to make smarter business decisions.
- Increasing operational efficiencies.
Turning to the legal space – in particular, contract management, how can AI best serve this notoriously changing and tech-adverse profession?
Well, a 2021 survey of legal executives revealed that around 72% agree there are real opportunities for automation within legal organizations – with the majority citing that contract management was the area needing the most improvement.
How AI works in contract management
Traditional contract management is manual, time-consuming, and laborious. Not to mention a vast waste of fee earners’ time that they could spend billing clients and increasing revenue for their firm.
In terms of contract management, the machine learning branch of AI is the most relevant, as it focuses on building algorithmic models to identify relationships and patterns in data.
Implementing AI to automate contract management requires teaching an AI program to identify different types of documents. For example, AI programs can learn to distinguish a set of non-disclosure agreements (NDAs) during a proposal generator session. AI can pick out NDAs in sets of documents, including specific language, and create the next series of steps based on your requirements. You need to create data rules such as “If this contract is an NDA, send it to x employee for compliance checks”.
AI is also used to recognize patterns in big data sets, specifically to identify relationships between contract data. In addition, it can detect errors and anomalies and create patterns to optimize firms’ contracts. You can use it to extract valuable data such as commonly renegotiated contract clauses and time to sign.
This means information can be used to improve processes, support re-negotiation strategies, identify upsell opportunities, and improve operations over time.
How AI delivers value
Cost savings and revenue gains
Much of lawyers’ work is repetitive – for instance, every client onboarding requires a due diligence check – so using AI to perform compliance checks vastly speeds up the process. In turn, this means clients can pay deposits to law firms faster. Lawyers can start working on matters quicker. So, you have happy clients and happy law firms that get paid.
Automating contract management processes allows lawyers to focus on substantive work, safe in the knowledge that AI is handling contracts and flagging any important issues as they arise.
To minimise wasted time and money resulting from inefficient contract workflows, contract administrators must be able to check the time frame in which individual contract tasks are completed, as well as which tasks are prolonging cycle times.
The best legal contract management software automates the contract management process by swiftly improving workflows and team collaboration for speed of service. Reliable, AI-powered contract management software delivers intelligent workflow automation to support task performance monitoring. Contract managers can quickly see how many days it takes to complete tasks, thus promoting accountability. Having this visibility means that tasks can be quickly escalated to keep the contract lifecycle moving.
In addition, AI can easily check the number of days contracts are in each status stage of the contract lifecycle to visualize potential bottlenecks in the workflow process. This enables tasks to be reassigned, rotated, or escalated if necessary.
AI takes the guesswork and human error out of the equation.
When humans copy and paste templates to create contract drafts, important sections are easy to miss. Overworked lawyers handling compliance contracts spend countless hours proofreading documents, ensuring all the relevant details are included, and flagging potential risks. Ever-increasing industry regulations mean inefficient contract management processes can lead to unnecessary risks.
AI can help reduce the possibility of human error – some AI programs allow users to choose specific clauses for acceptance, rejection, or further review. When a lawyer uploads a new contract, the AI program will review it, identify missing or incorrect clauses, and flag the contract for further monitoring. Further use cases can advance AI to detect clause deviations, deletions, and contract modifications – and then offer suggestions to update the contract’s language.
AI-enhanced business operations run on the basis of constant analysis to notify legal professionals of client account changes, and therefore, their compliance risk. Contract management AI provides insights on particular clients’ risk ratings to accurately calculate the firm’s overall risk. Some contract management software can offer risk profitability statuses and the potential exposure from those contract risks. This software can be highly beneficial for firms to prove their regulatory compliance to inspecting bodies.
Firms that have complete visibility across all processes reduce their risk substantially.
Enhancing contract management performance with AI
Leveraging AI technology streamlines and simplifies tasks related to contract management, which allows law firms to:
- Ensure compliance with regulatory bodies and associations.
- Drive business efficiencies and scale up the business.
- Mitigate risks across contract processes and procedures.
- Speed up contract drafts and reviews to enhance client service.
- Boost matter work and enable faster firm payments for improved cash flow.
- Deliver work in a timely manner.
- Simultaneously analyze and review contracts to reduce manual work burdens.
AI and contract management – final thoughts
The impact of AI on business is significant when organizations harness this power in the right way. The key is to adopt AI technology to automate manual processes to become more efficient, with firm use in mind. This technology is now readily available for businesses to start implementing AI to start automating those manual and repetitive processes – and take steps to scale up the business.
As shown here, AI has many potential applications in contract management. AI can save your business money, improve operations and increase productivity. Isn’t it time to embrace AI in contract management?