Artificial intelligence powers effective contract lifecycle management
Contract lifecycle management (CLM) is about more than a filing system for contracts. The benefits of a modern approach to CLM extend beyond file organization and into the heart of your business operations and legal guidance.
The legal departments that truly maximize the power of CLM use a CLM tool powered by artificial intelligence (AI). With an AI-enabled approach to CLM, you can drive better insights into the business, let your lawyers focus on advising, reduce human error, and manage costs.
Creating a system of intelligence
To understand how AI enables effective CLM, it’s helpful to take a step back and consider the CLM maturity model.
- Early iterations of CLM often provide a system of record. That is, they provide a place for the legal team to record and track contract-creation activities. Key functionality would include signature, storage, and search functions.
- As a law department’s approach to CLM matures, CLM becomes a system of engagement that helps the team ensure governance and compliance. With the right technology, the legal team can provide contract analytics and reporting as well as insights on the impact of external events.
- Finally, the most mature approaches to CLM provide a system of intelligence. The legal team uses a CLM tool with AI capabilities; AI helps the team identify risks and provide predictive analysis to the executive team and the business.
Rather than having attorneys relying on sorting contracts by date or manually checking clauses for consistency, the AI in the department’s CLM tool will automate these tasks. It can examine clauses and know where the outliers and patterns are. From there, the tool can provide chatbots for engagement with users, find contracts that may be impacted by new business developments, and tag legacy and third-party contracts for review as needed.
This automation helps the business and the legal team, too.
Deliver better insight into the business
When companies examine their strengths, weaknesses, opportunities, and threats, they’re looking at both external and internal factors. Often, weaknesses and opportunities can be found in the body of contracts to which the company is a party. The business might want to look at questions like:
- What are opportunities to cut costs or pivot to new technologies?
- What is keeping us stuck in this reseller model?
- Where can we raise prices?
- How many of our contracts are evergreen and where do we have to secure signatures with each renewal?
- Are we free to sell into new markets or are we limited by agreements with market partners?
When contracts are simply stored in a system, rather than embedded in a system of intelligence, answering these questions would be a mammoth task for the legal team. With AI-powered CLM, these answers will be readily available so the business can quickly act on the decisions these insights enable.
Let your lawyers focus on advising
Artificial intelligence doesn’t just help the business pivot quickly; by using AI for CLM, the legal team will spend less time on manual sorts and searches and can spend more time interpreting what they find. The benefit to the legal department overall is twofold. First, your lawyers will deliver more high-value work to the business, which helps you protect your team and build better relationships across the organization.
Second, your lawyers will enjoy their work more. With high attrition rates and high costs to replace employees, most leaders are looking for ways to improve employee retention. Providing tools and systems that improve your team’s job satisfaction and connection to colleagues can help keep them in their roles — and happy.
Reduce human error
Culling through hundreds of documents is time consuming for the team and creates delays for the business. It also opens your analyses up to the possibility of human error. That means you could miss an opportunity for operational or revenue improvement or understate the company’s obligations and burdens. Either type of mistake can have negative effects on the business and damage your department’s credibility.
Using a CLM tool with AI helps minimize the risk of missing or misunderstanding your contracts and obligations. It helps you deliver accurate insight with fewer hours of work — and far less chance of mistakes.
There are two places AI can help you cut costs: in your business and in your department.
Often a business is sitting on cost-saving opportunities within its contract assets and doesn’t even know it. For instance, you may have out clauses for products the company isn’t using. By looking at your contracts through an AI lens, you can spot these opportunities and surface them for the business, creating cost-control conversations that help the bottom line.
As for cost management in your department, are you feeling understaffed yet unable to win the case for more headcount? Using AI in your CLM will cut down on manual work across your entire team. Over time, you may find that you can thrive even without adding an additional headcount. The investment in technology can help stabilize your need for people while making the work more satisfying for your existing team.
Moving up the CLM maturity model toward a system of intelligence by AI is an investment, to be sure. But it’s a worthy effort that will help your team take advantage of modern analytics and tools that improve business outcomes and contribute to job satisfaction.
Learn more about how to approach contract lifecycle management in the Thomson Reuters report, “See the bigger picture: Shift from “handling contracts” to contract lifecycle management.”
Learn how HighQ helps streamline operations and tackle common challenges like document management, contract lifecycles, service requests, and matters