We’re currently in the middle of the greatest disruption to how we work since the invention of the steam engine. From robotic process automation to voice recognition and natural language processing, artificial intelligence (AI) is enabling businesses to meet their objectives more efficiently and effectively than in the past, with forecasts that AI-based technologies will contribute up to $15.7-trillion to the global economy over the next decade.
And this year is expected to be a landmark one with regards to artificial intelligence adoption: according to a survey of more than 1,000 U.S.-based business leaders by PwC, 2019 is the year in which AI efforts will accelerate, with one in five businesses expected to implement enterprise-wide AI initiatives by its conclusion
The discipline of contract management is ripe for improvement from AI because the large volume of contracts in the possession of most enterprises means that there are large datasets which machines may leverage. The administrative and repetitive nature of certain contract management-related tasks also makes the work well suited to the immediate improvements AI may deliver.
But going beyond the theoretical, it’s worth taking a practical look at the applications of AI that can readily improve common contract management challenges. Some of these AI-based applications can be currently rolled out and deliver immediate efficiency improvements; others will deliver real benefits in the future. Either way, these applications will improve the workflows of contract managers, shortening contract cycle times and other metrics and relieving contract managers of necessary but mundane, low-value work so that they can drive greater strategic value within their organizations.
Application 1: Automated Contract Classification and Tagging
How It Helps: One of the fundamentals of a strong contract management strategy is having all agreements within an organization’s portfolio organized within a single location. This reduces many common challenges of contract management, from simply being able to find contracts as the need arises, to keeping on top of contractual obligations and performance during an agreement's term, to being able to measure and analyze contract performance and trends at a macro level.
None of these tasks can be easily performed if contracts are not centralized and organized – and yet the manual work of reading, classifying, and tagging each and every document is often a deterrent to this important contract management precursor. And even once the initial work of establishing a contract repository is completed, contract managers are faced with an ongoing flow of new agreements to onboard, perpetually creating fresh bottlenecks and other business risks.
Automated contract classification and tagging can help contract managers quickly cut through piles of new agreements. AI technology enables contract management software to automatically categorize and label contracts, crawling the text of an agreement and determining its contents based on the keywords within, potentially saving contract managers hours of work.
When: Available now
Application 2: Auto-notification and Reminder Tools
How It Helps: It can be a lot of work to keep on top of all the various tasks and milestones associated with multiple contracts. But a failure to abide by contract terms and to monitor contract performance on a regular basis can greatly increase contractual risks. AI can reduce the hazard by allowing contract managers to automate reminders for their various contract-related obligations, and allowing them to set up automated reminders and notifications for other stakeholders who have roles and responsibilities in fulfilling individual contracts.
From ensuring deliverables are on schedule, to regularly keeping tabs on compliance-related obligations, to prompts to commence evaluating the ROI of a contract in advance of an auto-renewal or termination window, automating reminders can help to ensure that no task is forgotten.
When: Available now
Application 3: Machine Written Contracts/Automated Contract Clause Suggestions
How It Helps: As AI capabilities continue to improve and become more sophisticated, we will see even more applications that provide value and reduce risks throughout all stages of contract management. One useful application to look for will be intelligent contract writing tools that suggest relevant terms and clauses based on the information provided.
For example, simply entering in a customer address that is located in a specific country could prompt a smart AI-based contract generation tool to add terms related to currency fluctuations or region-specific compliance requirements. Such recommendations would be based on a machine-based analysis of volumes of previous contracts in which bots learn to make associations between specific contract features and the terms they include. Such capabilities will both speed the process of drafting new contracts and help businesses to potentially increase the value of contracts and reduce their risks. These benefits are due to the fact that humans would have to spend less time “reinventing the wheel” in order to develop new contract templates, as well as the fact that machines, capable of crunching vast volumes of data points, would more efficiently be able to spot correlations between contracts that have performed successfully and specific terms therein.
When: Stay tuned