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Sep 21, 2020

Contract AI analysis – Strongest Ally of Risk Management

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Artificial Intelligence focused on contracts is the due diligence your contract data needs for highly efficient and effective risk management. Managing your contract data may be one of the most important steps to making your organization more resilient. Knowledge and clarity of your organization’s contract health improves your power to make adjustments during changing times. Here are the top five reasons why AI contract analysis is worth the investment. 

  1. Measure the health of your data: AI contract analysis offers a simplified approach to a much-needed review of contract data. It validates if your contract records are trustworthy.

Accurate data entices the user to fully adopt the contract system and related processes. It increases day-to-day productivity, which in turn provides a higher value to the user. With an increase in user adoption, the investment of the CLM program can be fully realized. It consequently will improve contracting habits within the organization. 

  1. Improve contracting habits: The first step to improving your contracting habits is to understand how your contracts are being drafted. AI contract analysis helps clarify which clauses have historically been highly negotiated versus clauses which remain standardized in executed agreements. This efficiency drives consistency within your organization’s contractual obligations. 

AI machine-learning technology in contract analysis accurately identifies which clauses fit into which category. It consequently improves the organization’s contracting process, increases standardization, and reduces time-to-close. A CLM program that works seamlessly always improves contracting habits.

  1. Identify and track KPIs: Managing your organization’s contract data through AI contract analysis can provide actionable business intelligence. This enables your organization to plan for obligations, manage risks, and highlight areas of lost revenue (sell side) or overspend (buy side). Performing contract analysis quickly and accurately identifies contract terms, conditions, obligations, and commitments that impact the business performance across departments. Using those data points, organizations can formulate plans to improve operations and profitability.
  1. Mitigate risk: Risk management is at the heart of an organization’s strategic plan. The power of contract AI identifies terms that can otherwise pose enormous risk of debilitating financial implications. Contract AI analysis helps to identify, track, and proactively manage these terms and clauses. 

It is important to use AI and contract review to locate and extract certain data fields and clauses. Some examples are Termination for Convenience, Limitation of Liability, SLA Remedies and Penalties, and PII  Clauses. This process will allow organizations to properly determine their risk exposure and identify ways they can reduce that vulnerability. 

  1. Negotiate more favorable terms: Contract AI helps assess the value of your organization’s current vendors, customers, and partner relationships. Your organization’s existing contracts are an asset that can be leveraged to increase its overall health. 

This data helps your organization to negotiate better contract terms. Having historical data points will put an organization in position to draft future contracts with more favorable terms and clauses. It maximizes cost savings and optimizes revenue opportunities in future contracts. The overall process becomes highly efficient, resulting in reduced expenses associated with the contracting process.  

Organizations that invest resources into contract AI analysis will receive the benefit of a full discovery and analysis of their contracts. They can reap immediate positive results that will reduce risk and maximize profitability across all contracts. 

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