AI-Powered Contract Lifecycle Management

AI-POWERED CONTRACT

LIFECYCLE MANAGEMENT: Shifting to Contract Intelligence

AI-powered Contract Lifecycle Management: Shifting to Contract Intelligence

CHAPTER 1 WHAT IS ARTIFICIALLY INTELLIGENT CONTRACT LIFECYCLE MANAGEMENT? Complex multi-geographic value chains leverage contracts for strategic and operational advantages. Synergies of artificial intelligence (AI) and Contract Lifecycle Management (CLM) are set to revolutionize these fronts.

9.2%

per year

Contracts, today, are not static, unyielding documents to be archived, rather live, strategic tools that drive operational value from the written word to the enterprise. An International Association for Contract and Commercial Management (IACCM) study reveals that poor contract management can result in revenue losses to the tune of 9.2 percent every year.

CLM adopters are yet to realize its maximum potential, with most enterprises using it just as a repository.

Restricted scope to configure workflows, alerts, and dashboards, as well as extensive user training requirements in the erstwhile CLM, has translated into low user adoption rates.

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AI-powered Contract Lifecycle Management: Shifting to Contract Intelligence

Understandably, an IACCM report reveals extremely low client satisfaction levels with available solutions—user ratings dip further to 3.6 on a scale of 10. Application of Artificial intelligence (AI) in CLM is set to become the tipping point.

AI-powered CLM consolidates the contracting process’ multidisciplinary stakeholders onto a single platform with access controls, customizable approval processes, and aided review. It extends CLM capabilities to smart contract creation, intelligent storage, and need-based reporting. CLM solutions that leverage AI, typically employ machine learning, natural language processing (NLP) and parsing.

AI-enabled solutions eliminate the need for multiple e-mail chains.

AI can seamlessly parse and incorporate third-party agreements as well as amendments. Such integrated views streamline the review process, eliminating duplication efforts and steering the focus to constructive discussions and contract closures.

Workflows can be automated to pre-approve defined safe contracts, while high-risk contracts can be put through an appropriate workflow. AI-enabled systems can classify risks, and depending on the type and level of risk, can assign them to the right stakeholders.

The application of AI redefines contracting process. Automation of workflows, better cross-functional coordination, contract standardization, higher visibility and better enforcement of terms through two-way synchronization with existing enterprise tools are process efficiencies that AI ushers in.

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AI-powered Contract Lifecycle Management: Shifting to Contract Intelligence

CHAPTER 2 THE AI ADVANTAGE With advancements in technologies of machine learning, natural language processing (NLP), and text analytics, the popularity of artificial intelligence (AI) is growing across business functions and processes including contract lifecycle management. Let’s explore the key benefits that AI brings to the CLM process.

SMART CONTRACT AUTHORING AI builds on the clause library in earlier generation CLM systems to deliver intelligent contract creation. AI-based CLM solutions now automatically identify and arrange contracts and clauses in the contract library. At the same time, AI helps extract meta-data from documents for future use. Machine-learning algorithms enable CLM solutions to automatically learn from track records of past contracts to suggest approved, proven clauses and pre-defined key terminology. For example, the system prompts for the inclusion of currency fluctuation clause(s) in an inter-country contract.

AI combines parsing with NLP, optical character recognition (OCR), and text analytics to change legacy contracts and third-party papers into workable documents. These technologies analyze such contracts and classify them into sections, terms, and clauses. This not only limits the risk and errors but standardizes document language, minimizes the negotiation timeframe and boosts productivity. Smart authoring and efficient tracking, with detailed review trails, enable users to pace up contract creation with maximum conformity to policies and regulations.

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AI-powered Contract Lifecycle Management: Shifting to Contract Intelligence

CONTRACT DISCOVERY Contract centralization and easy access to contractual information throughout the lifecycle ensures a holistic view of commitments, reduces friction, and aids in the creation of fluid value chains.

Clause retrieval is simplified through configurable contract meta-data, keyword, and free text searches. These capabilities extend to legacy contracts and third-party templates as well. AI powers search capabilities to extract specific sections, clauses and even phrases from contracts to aid future drafting, re-negotiations, and enforcement of policies.

Such sophisticated tracking of granular clause level data also means that users can set up e-mail or text alerts and reminders for various parameters like contract renewal, purchase commitments or currency fluctuations, all thanks to AI!

SMOOTH INTEGRATION WITH OTHER ENTERPRISE TOOLS Two-way integration with transactional systems like ERP or CRM introduces consistency as well as automation in business processes.

For instance, integration with ERP results in better performance tracking and improved compliance—post-award.

Such integration enables top management to have a clear perspective of the business’ contract portfolio vis-à-vis actual performance through more relevant business dashboards. AI is also capable of tracking and flagging key obligations such as quality, delivery schedule, and volume discounts. Adherence to committed deliverables can save organizations considerable dollars in penalties and non-compliance.

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AI-powered Contract Lifecycle Management: Shifting to Contract Intelligence

BETTER BUSINESS ANALYTICS FOR CONTRACT MONITORING Timely analysis of relevant data empowers businesses to bridge contract visibility gaps and derive maximum value from their negotiated contracts. AI-powered CLM has various advanced capabilities to report on contractual data from the system across the contract database, and across geographies and languages.

User-defined dashboards can be generated to report milestones, key performance indicators (KPI), service level assurances (SLA), or any other parameters—as and when required. For example, it is now possible to understand the business’ payment obligations or to identify all contracts bound by a specific regulation or contract condition—for example, requisite quality assurance. Higher visibility into contracts thus enables performance tracking, improves compliance, and optimizes obligation management.

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AI-powered Contract Lifecycle Management: Shifting to Contract Intelligence

CHAPTER 3 BUSINESS BENEFITS DUE TO AI-DRIVEN CONTRACT MANAGEMENT Complex multi-geographic value chains leverage contracts for strategic and operational advantages. Synergies of artificial intelligence (AI) and Contract Lifecycle Management (CLM) are set to revolutionize these fronts.

Automated compliance ACC Chief Legal Officers 2018 Survey has found Regulatory or Governmental changes being rated very/extremely important by the highest number of respondents, i.e., 74%. Compliance being the most important factor, it ends up attracting a lot of resources both in-house and through outsourcing. Artificially intelligent contract management eases off the burden on manual tasks which are given to errors and omissions.

The smart contract management tool becomes the best aide to legal departments for staying ahead of regulations across various countries and regimes.

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74% ACC Chief Legal Officers 2018 Survey had found Regulatory or governmental changes being rated very/extremely important by the highest number of respondents, i.e., 74%.

Copyright 2019 Ultria.

AI-powered Contract Lifecycle Management: Shifting to Contract Intelligence

Reduced cycle times Since contracts creation involves multi-disciplinary teams, a large portion of time is lost in multiple back and forth of documents during reviews. CLM cuts a lot of time and effort by bringing all stakeholders on a single platform. A Forrester Research report says that CLM solutions shrink the timeframe required by legal teams to draft and review contracts by up to 80%. AI also compares previous versions and underscores changes with audit trails. This ensures that users focus on risk assessment and value generation rather than tackling operational hurdles.

Cost savings Most organizations tend to incur losses due to opaque and inaccessible contractual obligations. The cost of a standard, low risk procurement contract from draft to signature has increased 38% in six years and stands at a whopping $6,900 (IACCM). This is where AI driven CLM offers huge value-add. It cuts down legal operations costs by reducing dependency on legal process outsourcing and empowers in-house teams to keep things under control. AI-enabled CLM also tracks utilization to identify up-sell and cross-sell opportunities and enforces penalty clauses in case of non-fulfillment of contractual obligations.

Risk mitigation A poorly vetted contract exposes an organization to many forms of risks. According to an IACCM article, ‘inherent gaps in the contract language amounted to nearly 40% of the total obligations owed by each party toward the other’. AI plays a vital role in identifying and mitigating risks throughout contract lifecycle. It harnesses NLP and parsing to compare contracts, highlight changes, uncover hidden clauses and underscore terms inconsistent with approved templates for better risk management.

Configurable workflows further ensure review of different risks by the appropriate departments.

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80% A Forrester Research report, “Market Overview: Contract Life-Cycle Management”, says that CLM solutions shrink the timeframe required by legal teams to draft and review contracts by up to 80%

38% The cost of a standard, low risk procurement contract from draft to signature has increased 38% in six years and stands at a whopping $6,900 (IACCM)

40% A research mentioned in an IACCM article highlights that inherent gaps in the contract language amounted to nearly 40% of the total obligations owed by each party toward the other and was used by service providers/vendors to their benefit.

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AI-powered Contract Lifecycle Management: Shifting to Contract Intelligence

CONCLUSION AI transforms static contract automation into a more dynamic solution that acts in accordance with the business situation. This offers more suitable analysis and recommendations. AI-enabled CLM solutions go beyond simple data searches—data is used to build actionable intelligence.

Intuitive contract authoring wizards, potential risk clause warnings, augmented visibility, easy retrieval from repositories, real-time contract performance and obligation tracking now turn contracts into prospective revenue streams. AI strikes the right balance between people and technology, which allows high-value resources like lawyers to focus on strategies, legal counsel and decision-making.

AI transforms static contract automation into a more dynamic solution that acts in accordance with the business situation. This offers more suitable analysis and recommendations. AI-enabled CLM solutions go beyond simple data searches—data is used to build actionable intelligence.

Intuitive contract authoring wizards, potential risk clause warnings, augmented visibility, easy retrieval from repositories, real-time contract performance and obligation tracking now turn contracts into prospective revenue streams. AI strikes the right balance between people and technology, which allows high-value resources like lawyers to focus on strategies, legal counsel and decision-making.

103 Carnegie Center, Suite 201, Princeton, NJ 08540

info@ultria.com

ultria.com

Copyright 2019 Ultria.