Since contracts are the primary source of risk and obligations that corporate legal teams need to manage, all stages of contract lifecycle management should be managed properly. Failure to do so can lead to complications such as failure to enforce negotiated supplier terms, regulatory breaches, inadequate delivery to customers, time lost, revenue leakage and inflated costs.
Many legal departments are struggling to find effective solutions for handling contracts for all stages of contract lifecycle management, with 71% of in-house lawyers reporting that they are stuck doing manual work which should be automated. Another 86% say that they need to modernize the way they deliver legal services. The industry is seeing legal departments making moves to adopt comprehensive contract lifecycle management (CLM) solutions to standardize processes and obtain a single source of truth for all their contracts.
However, not all CLM technologies are created equal. Many require time-consuming manual entry and maintenance, putting further burden on already stretched teams. AI-powered CLM systems abstract away much of this manual work, giving corporate legal departments the ability to control their contracts from start to finish and free up lawyers to focus on higher-level tasks that will help grow the business.
But what exactly should the combination of AI and CLM look like? It should intelligently augment, assist and automate manual activities throughout the entire contract lifecycle, improve consistency, save time and surface insights that allow the legal team to become much more proactive.
As legal teams incorporate this new technology, there are several functions they should expect when it comes to pre-signature contract management and post-signature contract management.
AI for the Pre-Signature Contract Management Stage
AI contract management solutions should come pre-trained, meaning you aren’t doing the “heavy-lifting” on the implementation side. To learn a task, AI often needs large data sets to analyze, which is a highly specialized and technical process. Modern legal AI providers should handle this training, giving lawyers out-of-the-box functionality to use it within days – not weeks or months.
The real value of AI is that it is always learning and improving. Pre-training will have it ready to use quickly, giving you a faster return on your investment. As you use it more, it should identify and enforce preferences unique to your corporate legal department. This pre-learning also gives the legal team the space needed to improve the overall CLM process.
For the pre-signature contract management stage, AI should function as a human lawyer for the first-pass review. It should scour Microsoft Word or PDF contracts like NDAs, MSAs and purchase agreements, flag key contract issues, apply contract review templates, suggest edits and provide an overall risk profile.
The AI should also work where your people work, ensuring that the intelligence you’ve invested in slots into your existing processes, be it from email, Microsoft Word, Web portals or third-party systems. This ultimately maximizes the benefits and impact of AI.
AI should also enable self-service for non-legal business professionals during this stage. For example, business users should get an AI-assisted contract review in minutes through email or a self-service portal. The AI runs the contracts by the company’s playbook, helping to enforce corporate standards.
AI for the Post-Signature Contract Management Stage
The contract process doesn’t end once you’ve signed. Contracts offer a wealth of usable data that you can, and indeed should, harness to save time, reduce risk and make more informed business decisions. Proper management of contracts in this stage also ensures that the terms of the agreement are fulfilled and helps to assess if the company is meeting expected business results. For most teams, this work is currently done manually or not done at all.
When added to contract lifecycle management after execution, AI dramatically increases the efficiency and scope of data extraction. It quickly and securely extracts valuable, high-quality data from all the contracts in your CLM system and turns it into actionable information in several ways, including:
- Batch review, by extracting data from multiple legal documents at once
- Repapering, by amending or redlining contract details and critical terms to comply with regulatory changes or M&A activities
- Contract abstraction, by identifying critical legal clauses, terms and details in documents for easy analysis and syncing with your CLM.
- Audit compliance by automating large-scale legal contract review when regulatory changes occur and exporting relevant details in notes and reports
- Due diligence through the automation of batch review of contracts for routine legal due diligence, freeing up resources
- Legacy contract migration by rapidly analyzing and extracting legacy contract metadata, including critical dates, terms, and clauses, to assist in importing
AI tools empower you to simplify contract data extraction and get your hands on the valuable intelligence you need to make the best-informed decisions for your company.
How quickly does it accomplish this?
Imagine the highly manual process of data extraction from contracts. Now, imagine AI technology that can review thousands of contracts at once, view hundreds of contract data points and export relevant data in seconds.
The Benefits of Contract AI
Using AI in all stages of contract lifecycle management provides sizeable benefits. For example, legal professionals reported in this study that AI increased productivity by more than 51.5% and led to cost reductions of 33% related to contract processing. During the post-signature contract management stage, you should be looking to reduce manual entry in CLM by upwards of 80%.
The legal profession is continually evolving, getting faster and more complex as demand increases and resources decrease. AI can help you meet those demands without adding resources – especially when it comes to contract lifecycle management.
The Future of Contracting: CLM + AI Transformation at Lenovo
If you’d like to learn more about AI for CLM, access the replay of “The Future of Contracting: CLM + AI Transformation at Lenovo.” Legal operations executives from Lenovo shared their strategy for a global rollout of contract lifecycle management technology and why artificial intelligence is considered a key part of the services delivery model of the future.