How AI is revolutionizing contract landscape: A comprehensive guide
Artificial intelligence has deeply permeated numerous industries, providing innovative solutions to complex problems and significantly enhancing efficiency. One significant area where AI is making a profound impact is contract management. This article discusses in-depth how AI is transforming the contract landscape with its remarkable features and capabilities.
Understanding Contract Management
Contract management essentially involves supervising contracts from origination to conclusion, incorporating continuous monitoring and performance evaluation. It includes the following primary stages:
Contract creation: This includes crafting the contract's terms and conditions, delineating the scope of work, and ensuring conformity with legal and regulatory necessities.
Contract execution: This encompasses finalizing the contract, signing it, and distributing it to the relevant parties.
Contract supervision: This involves tracking the contract's progress, monitoring performance, identifying risks, and taking corrective action if necessary.
Contract renewal or termination: This involves reviewing the contract at the end of the term and deciding whether to renew it, amend it, or terminate it.
Effective contract management is pivotal as it ensures all parties adhere to the agreed terms and conditions, prevents disputes, ensures contracts are delivered on time and to the required standard, optimizes resource utilization, and maintains good relationships between all parties.
The Impact of AI on Contract Management
AI is significantly changing the way contracts are managed, leading to enhanced efficiency, reduced errors, and better decision-making. Here's how AI is revolutionizing various aspects of contract management.
Contract Analytics
Contract analytics involves employing AI and data analysis to draw insights from contract data. This process includes parsing through vast volumes of contract data to pinpoint crucial information and trends that can help improve organizational efficiency and mitigate risks. Some key aspects of contract analytics include:
Data extraction and tagging: AI tools can automatically extract pertinent data points from contracts and tag them with significant metadata.
Data visualization: After data extraction and tagging, it can be visualized in easy-to-comprehend dashboards or reports that provide insight into contract performance and risk management.
Risk assessment: Contract analytics tools can help organizations identify potential risk areas, such as clauses that may breach regulations or expose the organization to liability.
Performance tracking: Analytics can also be used to track contract performance over time, analyzing key metrics like contract value, renewals, and compliance.
By leveraging the power of AI, contract analytics can help transform contract management from a time-consuming and error-prone process to a strategic tool for enhancing organizational performance and reducing risk.
Contract Authoring
Contract authoring is the process of creating a new legal agreement or modifying an existing one. With AI, contract authoring becomes more efficient and effective. AI can provide smart templates that are customized to the specific terms and policies of a company. AI can also help ensure that a company's language is consistent throughout all contracts. Furthermore, AI can help extract relevant data from contracts, such as terms and conditions. This functionality can be useful as it ensures relevant, searchable data is readily available.
Contract Review and Approval
Contract review and approval are critical parts of the contract management process. AI-powered systems can streamline this process by automatically flagging potential issues in a contract for review by the legal team. These AI systems can analyze contracts and identify clauses that might be unclear, inconsistent, or non-compliant. They can also identify discrepancies in language, definitions, and terms across multiple contracts.
Contract Renewals and Terminations
Contract renewals and terminations refer to the process of renewing or terminating a contract when the agreed-upon terms come to an end. AI can speed up and simplify this process in the following ways:
Automated notifications: AI can notify both parties when a contract is about to expire, alerting them to make a decision about renewal or termination.
Predictive analytics: AI can use past data to predict the likelihood of contract renewal or termination, helping businesses plan accordingly.
Benefits of AI in Contract Management
Time Efficiency
Time efficiency is one of the main benefits of using AI in contract management. AI can automate time-consuming tasks such as contract review and approval, freeing up time for legal professionals to focus on higher-level tasks.
Cost Savings
Cost savings is one of the major benefits of integrating AI in contract management. By automating routine tasks such as contract drafting, review, and approval, organizations can significantly reduce the time and resources required to manage contracts.
Improved Accuracy and Quality
Improved accuracy and quality refer to the capabilities of AI contract management systems to perform tasks with a high degree of precision and reliability.
Challenges with AI in Contract Management
Integration with Existing Systems
When it comes to implementing AI in contract management, one of the major challenges is ensuring that it can be integrated seamlessly into existing systems.
Data Privacy and Security
Data privacy and security are vital concerns when it comes to AI in contract management. Companies should take measures to ensure that sensitive information remains confidential and protected against cybersecurity threats.
Ethical Considerations
AI in contract management presents several ethical considerations related to the use of technology in such a crucial area of business.
Real-World Examples of AI in Contract Management
There are numerous real-world examples of AI in contract management. Businesses across different industries are leveraging AI to streamline their contract management process. For instance, a leading telecom company used AI to automate its contract review process, reducing the review time by 60%.
In another example, a global logistics company used AI to analyze its contracts for potential risks and opportunities. The AI identified several instances of non-compliance in the contracts, helping the company avoid potential penalties.
These examples demonstrate the transformative power of AI in contract management. They show how AI can drive efficiency, accuracy, and transparency in the contract management process.
Recently, we launched the first beta of AI Contract Review. Even the current version significantly simplifies your contract routine. All you have to do is upload a document on Enty and get a full review done in a matter of 3 to 4 minutes.
As a result, you’ll get a contract summary in human language. This summary includes a general opinion on the quality of the contract and a score from 1 to 10. The main goal of the summary is to provide you with insights on the contract's quality right away.
In other sections, the tool will highlight all contract details in one place. Yeah, we know how hard it is to get this information by yourself. Another section provides insight on what you should pay attention to in relation to this contract.
Last but not least, our tool provides you with a list of improvements you should consider implementing in the contract.
The Future of Contract Management with AI
The future of contract management with AI is promising. Here are some ways AI will change the game:
Personalized contracts
Self-executing contracts
Predictive analytics
Increased transparency
Improved negotiation
In conclusion, AI is drastically changing the contract landscape. As more businesses adopt AI, contract management will become even more streamlined, efficient, and accurate, enhancing overall business operations and performance.
Right now, explore Enty to handle the majority of contract-related issues without having to pay lawyers. Create contracts from scratch and review the contracts sent to you on Enty. All on a single platform. No legal skills required; we've got you covered!
