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Nov 23, 2020

What is the Future of AI in Contract Management?


In both subtle and overt ways, artificial intelligence (AI) reaches into our daily lives, and its expansion into contract management is no exception. To those who are not familiar with the trajectory of AI contract management, that can be a source of anxiety. But instead of seeing AI as a threat to the human element of contract management, we should recognize it as a powerful tool that complements the highly skilled experienced professionals who specialize in it.

When implemented thoughtfully as part of a robust management workflow, AI can be used to offload aspects of contract lifecycle management that are critical to the process but occupy a significant part of an experienced professional’s bandwidth. By freeing these valuable managers from tasks that lend itself to automation  — such as contract generation,  negotiation, risk flagging, and workflow — they are available to apply their expertise to resolving issues and moving the process forward expeditiously.

When properly implemented, an AI-infused contract management process will derive value right at the start of the process. Advanced CLM software can recognize common contract elements and use those points to interpret intent. As the software’s algorithms process more data, and managers fine-tune the assumptions made, this machine learning process makes the software increasingly capable of creating initial drafts of contracts from a variety of source materials, from web forms to emails — even spoken descriptions or conversations when filtered through natural language processing.

AI can also intelligently guide contract negotiations as a powerful and proactive advisor. CLM machine learning capabilities help to assure managers that all policies are being followed appropriately, with discrepancies highlighted for exception review. An AI-enabled CLM software suite can also make data recommendations in real time to expedite and improve the negotiation process.

Risk mitigation is one of the most crucial aspects of contract lifecycle management, and this is another area where AI dramatically improves outcomes. AI-enabled CLM software does not replace the expertise of a skilled professional when it comes to mitigating risk, but it does help identify areas of non-compliance where non-standard language could result in unforeseen liabilities exposure.

Finally, AI can create efficiencies in the management of the entire contract lifecycle. Through machine learning, CLM software can intuitively and proactively flag key contract renewal dates, help to identify more efficient workflows, manage contract routing for execution, and manage obligations specified in the contract.

By incorporating machine learning into the process of generating and negotiating contracts, flagging risks, and managing the lifecycle of contracts, AI frees contract managers and lawyers to focus on high-value, high-return tasks. Artificial intelligence is not a replacement for the real thing. It’s a versatile service that skilled and savvy professionals will use to make contract management faster, easier, and more accurate.

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