How Is Artificial Intelligence Revolutionizing Contract Management

What is AI Contract Management?

AI contract management refers to utilizing artificial intelligence technologies and machine learning algorithms to streamline and enhance various aspects of the contract management process. Contract management goes beyond just drafting and filing beneficial contractual agreements. They are an endless source of business intelligence to optimize your operations. Artificial intelligence is transforming how businesses approach contract management by automating various processes, leveraging data, and promoting informed decisions.

The legal department can once and for all get rid of repetitive administrative tasks to optimize every phase of the contract lifecycle. AI contract management transforms contracts from static documents into knowledge sources. It enables more accurate contract search, categorization, and information extraction.

How does AI impact contract management?

As AI technology continues to advance, the capabilities of AI contract management systems will likely expand. Today's market-available contract management software provides businesses with even more sophisticated and beneficial features. But for now, here’s how artificial intelligence is driving contract management.

1. Contract Generation and Drafting: AI-powered contract management systems enable businesses to generate contracts based on predefined templates and clauses. It learns from existing contracts and legal documents to create templates with essential clauses and terms. AI can automatically fill in contract details, such as names, dates, and monetary values, reducing the need for manual data entry. It also facilitates collaborative editing, enabling multiple stakeholders to work on the contract simultaneously. AI contract management works with legal counsel to bring out competent agreements.

2. Contract Review and Analysis: AI can streamline the contract review process by automatically extracting crucial information from contracts, such as parties' names, dates, payment terms, and obligations. It can capture relevant metadata, like contract dates, parties involved, and contract types, enabling efficient sorting and filtering. AI can also identify potential risks and discrepancies, flagging them for further review by legal professionals. Contract review can verify whether contracts adhere to relevant laws, regulations, and internal policies.

3. Contract Analytics and Insights: Businesses can leverage AI technologies to extract valuable information, gain deeper insights, and make data-driven decisions from large volumes of contract data. AI can automatically generate concise summaries of lengthy contracts, highlighting crucial information such as parties involved, contract duration, key terms, and financial obligations. AI can identify trends, patterns, and risks across contracts, providing organizations with actionable data for decision-making, risk management, and compliance. AI-powered contract analytics also offers a comprehensive view of the contract portfolio. AI can analyze historical contract data to evaluate the performance of past contracts.

4. Contract Lifecycle Management: AI can automate and streamline various stages of the contract lifecycle. It can track contract milestones, send automated reminders for renewals or expiration dates, and assist in contract negotiations by suggesting alternative clauses or terms based on historical data and predefined rules. AI can help organizations manage contract management risks by identifying potential issues, such as non-compliance with regulatory requirements or deviations from predefined standards. AI can also assist in identifying violations or departures from predetermined rules.

5. Contract Data Extraction and Integration: AI can extract relevant data from contracts and integrate it with other systems, such as customer relationship management (CRM) or enterprise resource planning (ERP) platforms. It enables better data sharing, visibility, and integration across different business functions. AI-powered contract management systems can understand and interpret natural language queries, making contract retrieval faster and more accurate. Users can search for specific terms, clauses, or provisions within contracts, saving time and effort in manual searching.

6. Contract Compliance and Auditing: AI-enabled systems can monitor contract-related activities and transactions in real time, flagging potential compliance issues or discrepancies as they occur. This proactive approach allows for immediate intervention and corrective actions. AI can maintain an immutable audit trail of all contract-related activities and changes, providing transparency and ensuring compliance with internal and external audit requirements.

Takeaway

Traditional contract management or manual handling of contracts can be time-consuming, error-prone, and resource-intensive for organizations with extensive contract portfolios. That is why businesses are gradually shifting to AI solutions, up to 33% since 2018, to automate and optimize these tasks and lighten the load on their legal teams.

They can reduce the administrative burden associated with contract management by automating contract generation, review, and analysis. AI-generated insights and reports can help stakeholders make data-driven decisions and better understand contract trends and performance. Furthermore, AI contract management solutions can lead to better contract outcomes, increased compliance, and improved overall contract lifecycle management.