How AI can help with legal operations
Our team recently did a deep dive into a study from Thompson Reuters entitled, Ready or Not: Artificial Intelligence and Corporate Legal Departments. Their findings align with the feedback we’ve been receiving about the user experience within ContractAI. Not only are corporate legal departments discovering a game-changing resource – it is also their legal operations teams a lot of time and aggravation.
Historically, managing and analyzing a growing volume of contracts has been a source of headaches for corporate legal departments everywhere. Without the most diligent analog tracking and significant hours of manual data entry, it is nearly impossible to monitor the thousands of clauses within hundreds of active supplier and vendor contracts that enterprise level companies handle at any given time.
Without detailed, dynamic records, how can you assess the risk level your company is exposed to over the life of the contract? Laws and regulations change frequently – how does a staff and time-limited legal team respond to those changes in contracts, both retroactively and moving forward?
When you are accustomed to navigating workflows like this, a contract process that is fast, efficient, laser-focused on risk mitigation, and streamlined for your legal team – freeing them to focus on more strategic functions – might seem far-fetched.
The Thompson Reuters study looked at perceptions of AI and potential breakthroughs in contract management that AI tools can offer. We also observe these difficulties every day and believe that a tool like ContractAI can help your legal team face these challenges head-on – and thrive.
Respondents in the Thompson Reuters study mentioned the potential for AI to “offload simple decision making and laborious number crunching.” One individual noted that AI would mean “taking some of the menial work that I have to farm out to law firms and automating it in-house.”
Managing workflows and minimizing hours spent on menial tasks are indeed superpowers of an AI tool like ContractAI. Not only does it mean shortening the days to contract after an RFP, but also time in pursuit for suppliers. That is a definite win for everyone involved.
Without an AI tool, a contract gets redlined and everything has to go through legal – even language that has been written the same way hundreds of times before. With ContractAI, legal can focus on the important sticking points in the contract, and the rest has been confirmed unchanged.
ContractAI allows you to analyze hundreds of executed contracts and look for variations in clauses – instantaneously. When a potential vendor wants to edit the terms, having the data clearly in front of you enables you to respond with, “No one has asked us to change that clause, so we’re going to keep it the way it is.”
So, instead of months to contract with redlining back and forth, legal can vet the terms with an AI tool and be to contract in a week – or even less.
Another major challenge facing corporate legal teams is managing compliance. With so many agreements in place at any given time with an array of suppliers, how do you manage compliance during each contract’s lifespan, among the hundreds of contracts you are managing?
When the regulatory landscape changes – which is always – how do you make sure your contracts are in compliance with new laws? The task is usually handled by staffers manually going through a Word document searching for a keyword and reviewing the details of the clause. It’s quite tedious – to say the least.
With ContractAI, all of that changes. Instead, contracts can be quickly examined for their exposure to risk in the new legal/regulatory environment. “A simple query in the AI tool and you have found what you need,” said Mike O’Brien, CPO and Head of ContractAI for AppOrchid in a recent webinar conversation with Nicholas Wright, Digital and Innovation Sourcing Director with bp, “Compliance and regulatory consistency is achieved much more easily with a tool like ContractAI.”
For corporate legal teams, risk management is the ultimate concern. In the Thompson Reuters survey, analyzing and managing risk was seen as a key benefit of implementing AI tools in legal operations. Respondents saw the possibility for AI in “making work be more efficient and help identify corporate/legal risks. Perhaps even help support mitigation efforts for those risks and analysis of risk and means to control and allocate it.”
Without a tool to monitor it, your risk position is left wide open to human error. How many eyes are on this contract? What decisions were made in previous contracts? Where is this information available?
“We have found that companies with very similar risk profiles might have very different contract terms regarding risk,” explains O’Brien, “Without a tool to monitor risk, your risk position is dependent on the mood of whoever was working on the contract at a given time, and it will inevitably vary from contract to contract.”
ContractAI gamifies the process by scoring risk levels of clause language and options on a scale of 1 to 100. This helps:
- Narrow down the companies you want to establish procurement contracts with to those scoring at the lower level – say, 20 or below.
- Provide clarity for vendors around what you are offering and the risk levels you are willing to accept.
The Thompson Reuters study shows that there is a lot of uncertainty, but even more interest in the potential for AI to save corporate legal teams and their organizations time and money. Contract analysis and risk assessment are often seen as an unavoidable time and money trap. AI can completely upend that perception and the reality of how legal teams deal with contract management.