Tomorrows AIdriven contract management
|Colin Earl in Artificial Intelligence Tuesday, February 5, 2019|
As AI technology matures, it will create significant opportunities for businesses to not only speed the contract lifecycle, but also improve compliance and reduce value leakage.
Artificial intelligence (AI), a machine’s ability to perform human-like functions through planning, perceiving, learning, reasoning and problem solving, is poised to disrupt just about everything – or so the hype would have us believe. Businesses have begun to harness these technologies to tackle all kinds of issues. However, the reality is adoption has raised a spectrum of concerns from ethical to practical. Autonomous vehicles are yet to overcome safety concerns and increased automation has stoked worries about job security.
Still AI is worming its way into the marketplace.
Stanford’s AI Index 2018 Annual Report notes that AI capabilities are cropping up in high-value functions in various industries. Financial services organizations have adopted AI for risk scoring, auto makers have incorporated it in manufacturing and retailers use AI for marketing and sales innovations.
Software makers have harnessed the potential of AI to eliminate manual processes and speed iterative learning. Functions with complex workflows and lots of moving parts like contract management hold particular promise. KPMG estimates that “value leakage” from contracts – not taking advantage of full contract terms, renewing on time, etc. – can reduce a contract’s value by 17-40 percent. As AI matures, it will create significant opportunities for businesses to not only speed the contract lifecycle, but also improve compliance and reduce value leakage as well as risk.
Here are a few areas in contract management that are ripe for AI:
Boosting Contract Lifecycle Efficiency with Robotic Process Automation
In 2019, contract lifecycle management (CLM) software will incorporate robotic process automation (RPA) to automate routine tasks like approvals and notifications, resulting in shorter cycles and higher productivity. Gartner estimates that 85 percent of companies do not have effective CLM i.e. the process of moving a contract from creation to negotiation, review and approval through execution and monitoring. The result is long cycle times, stakeholder frustration and lost deals.
The most effective RPA systems are highly configurable and built on no-code platforms to allow exact mapping to existing workflows and immediate flexibility when workflows change. Data from McKinsey’s AI adoption survey revealed RPA is among the top two types of AI solutions being deployed in North America.
Generating New Contracts
In 2019, AI-enhanced CLM software will use predictive intelligence to automatically suggest the appropriate contract language and clauses, and flag discrepancies and risk factors. Today, businesses can save common contract clauses in a central repository and search them for use in upcoming contracts. Advances in Natural Language Processing (NLP) will enable users to create contracts with the appropriate language drawn from the full history of contracts in the organization – from emails or even conversations – at the click of a mouse.
In fact, as voice-activated technologies like Amazon’s Alexa mature, they will take over as the primary interface for accessing information. The transition will start with routine tasks. For example, rather than clicking through to a report or dashboard, managers will simply ask the voice bot to bring up the report or the relevant statistic, such as “Alexa: what is the total value of contracts up for renewal?” The next stage will include more sophisticated analysis using voice-activated technology, such as “Alexa: what are the differences between our NDA and that of a XYZ potential partner?”
Reducing Contract Cycle Times
AI-powered contract management systems will enable efficiencies in work processes and raise productivity as it reduces friction and eliminates manual handling of routine tasks. The system will minimize laborious manual reviews, speed up cycles by “learning” decision criteria based on agreements with similar characteristics and modify documents to meet corporate legal requirements.
Managing the risk associated with large volumes of contracts isn’t just about making sure all appropriate clauses are included. It’s also about monitoring compliance with the terms of the contract both internally and externally. Today’s contract management software does a good job of digitally auditing contracts to ensure they have the appropriate clauses related to data privacy, confidentiality or other regulations that affect businesses, such as GDPR, and assigning a risk score to each contract. AI-enabled software will take this a step further by automatically identifying revenue or compliance-related risk and suggesting appropriate action.
As AI matures, organizations will see new use cases for adoption and begin to realize its value at scale. In 2019, expect to see a broad range of advances in AI and a surge in companies’ investments, from embedding AI capabilities in their software, to contract management and other business process solutions.
This content is made possible by a guest author, or sponsor; it is not written by and does not necessarily reflect the views of App Developer Magazine's editorial staff.