Whether it’s the personalized list of movies recommended to you by Netflix or customer service chatbots that get you the answers you need day or night, AI has already had a transformative effect on everyday life and will continue to expand as technology evolves. Within the business world – including within contract management-related functions – we’re seeing growing benefits.
But how has AI – or artificial intelligence – already changed some of the key tasks associated with managing corporate agreements? And what realistic expectations should we have for AI’s ongoing impact on how contracts are managed? Keep reading to find out.
Understanding What AI Is
There are lots of different subsets of AI you may have heard of or used. These can include anything from computer-based video game opponents, capable of reacting to every move or action you take, the aforementioned movie recommendation algorithms (and other recommendation engines, from Facebook's newsfeed to Spotify’s song selections), self-driving cars, cameras that automatically adapt to low lighting, and countless other technologies.
The range of functions and applications seems diverse – but then so is AI. That’s because although people may use the term interchangeably to refer to specific intelligent machine-based functions, artificial intelligence is an umbrella concept that includes all of these capabilities (and more!).
How Is AI Changing Contract Management?
Now that you understand what artificial intelligence is, it becomes easier to understand its applications – both current and potential – as they pertain to contract management. Here’s how AI has already changed the discipline of contract management, and some of the ways it may continue to do so.
AI and Contract Management: The Current Situation
We may not be close to realizing the full potential of AI, but intelligent technologies are already making life easier in countless ways – and contract management is no exception. Specifically, AI can resolve some of the biggest burdens of managing massive volumes of agreements: classification and organization.
Keeping a well-organized contract repository is fundamental to strong contract management strategy. You can’t even begin to proactively manage volumes of contracts without knowing what active agreements you have, or without a plan to manage their obligations and milestones. Organizing your documents into an electronic, searchable format allows for this important visibility, but it is also one of the most onerous parts of contract management, as implementing a systemic approach first requires you to read each contract to categorize and tag it appropriately.
If you are required to manage a large portfolio, this upfront work can consume hours and hours of your time. AI automates such tasks by scanning your contracts and suggesting the appropriate tags, reducing much of the manual work of onboarding contracts. Automated reminders and notifications can further ease the burden of having to stay on top of countless contract-related dates and milestones that, if missed, can introduce risk to even the most basic business relationships.
With this manual work out of the way, contract managers can speed the way to execution and ensure key tasks and milestones related to the administration of contracts don’t get missed.
AI and Contract Management: What’s Realistic Moving Forward?
As the sophistication and accuracy of AI-based technologies continue to evolve and improve, so too will smart features that better meet the needs of contract managers, helping them to maximize the ROI of their agreements. It is estimated that most contracts leak between 17 and 40 percent of their value throughout their lifecycle. But as AI capabilities improve and as contract management software solutions roll out new AI-based features, such losses could be reduced.
While current AI capabilities help contract managers handle existing agreements more efficiently, the next wave may help improve the contracts themselves. For example, computers may be able to scan contracts looking for specific information and then, based on what they find, recommend stock terms to be included in the agreement. Let’s say the contracted party in your agreement has a foreign business address; based on this information, and based on data from previous contracts, an AI-based contract management application might then recommend terms to limit the impact of currency fluctuations or suggest specific requirements related to the geographic location that the individual drafting the agreement may not have considered.
Other foreseeable capabilities include more sophisticated early warning systems for under-delivering contracts and easier compliance monitoring, as machines and machine-based algorithms start to perform analysis on the data of existing and/or historical documents that once would have been limited by human capacity.
Both the current and future capabilities of AI have the potential to transform contract management in several key ways. By allowing contract managers to automate burdensome, repetitive tasks such as tagging, AI can reduce or even eliminate some of the drudge work of contract management, improving employee satisfaction and efficiency. As capabilities grow, AI will further benefit contracts by helping companies draft better agreements, improving the value and reducing the risks of many business dealings.