Artificial Intelligence

AI Contract Management

Asking the Right Questions, Getting Organizational Buy-in, and a Look to the Future

Artificial Intelligence has generated plenty of buzz in recent years, leading to a great deal of hype and conjecture around the impact it will have on the legal profession. Fear-mongering headlines would lead you to believe that AI technologies will drastically reduce the need for lawyers, having an almost apocalyptic effect on the industry. But in 2019, the industry wisely moved away from those fears, and accepted the fact that AI can help lawyers be more productive, complete tasks more efficiently, and focus on higher value work. So at least for now, we can safely say that computers will not be replacing humans anytime soon.

But with AI being the shiny new object in the legal industry, it can be tempting for legal teams to want to jump right in and get started without examining the potential use cases and the impacts it can have on their business. The first step should be to assess your team’s current situation and biggest pain points before investing too much time researching and implementing new software.

Asking the Right Questions

The first thing many law departments will do is ask, “What is our AI strategy?” Instead, teams evaluating the potential upside of AI-based tools should consider the core challenges their team has with the contract management process and if those pain points are things that AI has the potential to improve.

For businesses that deal with a large volume of contracts, the primary focus should be on finding tools to help automate routine review of contracts before agreements are finalized, or pre-signature. Post-execution review technology also offers great benefits, offering visibility into contract renewals and other terms that need to be continually monitored.

Contract management software with AI can automatically identify key terms including dates, parties, value, etc., and searches within a contract repository to ensure that there is consistency amongst similar agreement types and that company standards are met.

With added visibility into agreements, organizations can standardize contract terms and more quickly address non-compliant or other unfavorable terms. Post-execution review technology helps legal teams stay on top of important deadlines and avoid issues with the most important elements of contracts, like deliverables and payments, helping to mitigate organizational risk.

Getting Organizational Buy-in

In order to get buy-in on AI-based technology, or any new software for that matter, you’ll need to demonstrate that the tool has value and offers tangible benefits that will impact the organization. Adopting AI-based contract management software often requires a shift in thinking for legal teams in terms of individual workloads and functions, so it’s important to expect and prepare for some push-back. If there is indeed a natural fit for AI in your organization, and implementing the software will improve efficiency and allow teams to do more work in less time, getting buy-in shouldn’t be too difficult.

Naturally, this technology is also changing the skills needed to successfully manage contracts. With less focus on the traditional organizational skills required for this role, there will in turn be an increased focus on technical skills and process since the software handles most of the organization. By focusing on how the technology will enable those impacted to provide greater value to the organization, general counsel and legal operations professionals can help move the process forward leading into implementation.

Creating an implementation strategy upfront will help mitigate potential obstacles and ensure a seamless onboarding process to get up and running with the new software quickly. This will also reduce the time it takes for the legal team to see a return on investment, and help optimize the solution so that all users can get more done in less time and with less effort. Taking advantage of training sessions offered by the software provider is another great way to get up to speed and start gaining efficiencies brought by AI-based contract management tools.

A Look to the Future

AI contract management is likely to have the biggest impact on industries with highly routine, template-based contracts. Healthcare, government and manufacturing companies immediately come to mind as organizations that fit this description, but as the technology continues to evolve, many other sectors will benefit as well.

According to a Harvard Business Review article, AI contract management is likely to make the biggest positive impact in the following three ways:

  1. Changing the tools firms use to contract.
  2. Influencing the content of contracts.
  3. Affecting the processes by which firms contract.

As previously mentioned, contract management with AI is also expected to enable lawyers and legal teams to spend more time focusing on higher value work. Professor Gillian K. Hadfield, a law professor at the University of Southern California who specializes in contract law, said she believes that AI in contracting will lead to a better use of legal talent: “[L]awyers will shift their focus from routine activities to much more high value work involved in shaping strategies and navigating complex legal problems.”

As it pertains to contract management, artificial intelligence is still in the early stages of growth and adoption, but its ability to improve the effectiveness of the software is what matters most. Having visibility into your contracts helps legal teams avoid risk and make smarter, better-informed business decisions. We are not close to realizing the full potential of AI, but what is already clear is that it can supercharge certain elements of contract management technology, allowing for faster and more efficient contract drafting, review and execution.

For more information on artificial intelligence and its impact on contract management, download ​How AI Improves the Value of the Legal Department​, a free e-book from ContractWorks.

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