Contracting is a widespread activity, yet only a few businesses execute it well. In fact, according to a survey report, inefficient contracting costs businesses anywhere from 5% to 40% of the value of a deal, depending on the conditions. However, new technological advancements such as artificial intelligence (AI) are now assisting businesses in overcoming many contract-related issues.
Contract Management Challenges Businesses Usually Face
The biggest problem businesses confront concerning contract management is the vast number of contracts that they must keep track of; these contracts are often inconsistent and difficult to organize, maintain, and update.
Most companies don’t have a database of all the information in their contracts. There’s no easy way to look up complex business agreements or compare how a clause is presented across divisions.
As any lawyer knows, contract review entails hours of a thorough study of hundreds of pages of contracts. Even in the digital age, poor scan quality and the necessity to prepare a contract rapidly without faults can raise other challenges, and critical deadlines might be missed.
Effective Solution to Meet These Challenges
In this case, cutting-edge Artificial Intelligence (AI) solutions are helping to improve contract management in a variety of industries while also increasing speed and accuracy. Industries that were previously hesitant to accept new technology, such as legal services, are increasingly realizing the benefits of using AI to increase contract review and management capabilities.
AI will also lower the danger of contract disputes and expand the number of contracts businesses can negotiate and execute. In addition, AI automates contract analysis and administration operations.
It also frees up subject matter experts (leasing experts, insurance professionals, credit analysts, and, to name a few) to focus on more critical tasks. As a result, there is more efficiency and fewer risks.
Artificial Intelligence (AI) can improve the efficiency and effectiveness of the entire process and could be used for:
- Large quantities of contracts to review and analyze
- Using data to produce specialized agreements
- Identifying the contract’s potential flaws
- Translating contracts into other languages when necessary
The core purpose of contract review is to ensure that critical agreement terms are identified, cataloged, and managed effectively. Human subject matter experts oversee the clause extraction and interpretation process.So make choices based on the findings, while AI speeds up process.
The Scope of AI Software Utilization for Contract Management
Artificial intelligence is used for contract management in the following ways:
- Contract classification: Arranges each contract based on the content of the clause, such as an MSA, SOW, lease, or independent contractor agreement.
- Clause classification: Goes over the document and figures out what each paragraph implies. AI will classify the clauses based on their content.
- Highlighting data: Defines precisely what the clause projects by highlighting the primary portions of the clause.
- Discover new clauses: If the program is given enough papers with new clauses, AI can learn more about them and store them in its clause repository, increasing clause categorization over time.
- Supervised learning and retraining: A reviewer will modify misclassified clauses. Depending on what the reviewer designed it for, it can learn to recognize them in the future through supervised learning and retraining.
- Classification of related documents: Recognizes and distinguishes linked document types when classifying relevant documents.
Artificial intelligence (AI) tools are available to assist in contract assessment and negotiation. Because AI can considerably streamline the contract management process and give superior results. It is gaining a great deal of popularity among businesses and legal practitioners with high-volume contracts.
Besides, the combination of artificial intelligence (AI) and legal outsourcing service providers allows for extracting provisions from hundreds of contracts or more in less time and improving the performance of quality checks, leading to accurately structured contractual data. While AI does not eliminate the human element from contract review, it can make human reviewers more efficient and effective, lowering TAT and contract review costs by up to 50%.
