Why AI-powered Contract Review and Analysis is the future: It’s important to note here that while contracts have been brought into focus by the current crisis, the process has long been inefficient. The sophistication of AI and the rapid evolution of NLP and computer vision means that contract analysis no longer needs to be an effort-intensive process that makes for a hasty negotiation with inadequate information. Companies now understand the need to be familiar with risk clauses such as force majeure, the survival of obligations, and limitations of liability across their supplier contracts or other third-party contracts. However, that is not the only concern. Several other contract terms could offer valuable benefits. Take the example of discount clauses.

When capital is at a premium, enterprises must look to quickly shed spend by terminating non-essential contracts, making for another activity where speed and accuracy are paramount.

AI-powered contract analysis identifies and extracts information from contracts before providing the most relevant aspects for review. Combined with NLP and computer vision, advanced machine learning techniques are used to automate the evaluation of unstructured contracts, injecting efficiency into the management process. Whether it’s the extraction of clauses like non-performance or termination rights from procurement contracts or indemnity, confidentiality, and limitation of liability clauses across other agreements, intelligent contract analysis can substantially reduce the effort involved and improve the quality of contract management.

On the one hand, the technology makes for a more effective procurement function by reducing the reliance on legal. On the other, it ensures that legal teams are responsible for generating valuable counsel instead of time-consuming administrative tasks².

The Real Impact of AI: AI-based solutions offer a versatile, powerful, and customizable alternative capable of continuous learning. They ensure that early adopters will enjoy an intelligence advantage as the platform evolves to their organizations’ needs.
AI platforms often incorporate deep learning and progressive learning to enhance Natural Language Processing capability. They are, therefore, able to track variations in contract language for both simple business terms and even highly negotiated clauses with custom language. The resulting accuracy can be particularly useful for due diligence processes, compliance audits, and even third-party contractual language comparisons with an enterprise’s corporate standard. Moving from a descriptive to a predictive standard, AI can now all but eliminate OCR error-rates. These high accuracy levels and features such as redlining ensure that teams are looking at the most pertinent contract information at every stage of the review process. By offering a single source of truth in a consumable, searchable, and analyzable format, intelligent contract analysis lends itself to a wide variety of use cases. In the case of M&A, it allows the parent company to evaluate the acquired firm’s risk profile and interpret the change of control clause. Enterprises can examine vendor and sourcing contracts across their global supply chain, availing discounts, terminating non-essential spending, and building deeper relationships as required. Compliance, another major challenge, can also be more easily addressed with the speed and accuracy of AI-based contract analysis.

Additionally, by deploying predictive and cognitive modules, clients can implement standardized risk analysis and scoring systems, generating accurate and objective risk profiles.

Setting the Bar: While the advantage of AI technology is indisputable, it still pays to tread with caution when choosing a solution partner. Enterprises looking to transform their legal process must turn to providers with a demonstrable track record and expertise in the client’s domain. Also, the platform should not create a need for rip-and-replace. They must instead offer both upstream and downstream integration out of the box or through customization, working seamlessly with existing applications systems, eSignature products, and downstream visualization systems for dashboarding and other purposes.
The solution must have Machine Learning and Natural Language Processing (NLP) forming the bulk of its AI capability. It must include pre-processing capabilities which can correct document skew and background noise that may have occurred during the scanning process. It should have Computer Vision like capabilities that go beyond the limitations of generic OCR products in understanding the context of document extraction. It should also be adaptable and dynamic, offering multilingual capabilities. Finally, enterprises must determine if their solution provider offers a strong consulting and services arm owing to the risk involved and the speed of resolution required. As enterprises start to chart their path through the new normal, technology integration will prove to be a driver of resilience and growth. However, technology alone can’t deliver growth and business resilience and needs to be complemented by timely and critical human intervention. Instead of Human- in-the-loop soon the world will be talking about Human-is-the-loop. The validation of any AI model by legal and domain subject matter experts is critical and is usually found missing in the cluttered space of AI contract review solutions. You can expect to see the emergence of hybrid roles such as legal technologists tasked with creating enterprise legal teams of the future. Current talent will need to develop technical skills and an understanding of platform workflows to ensure the success of the transformation exercise. We are at an inflection point in the global enterprise journey, and it is safe to say that AI will drive this shift, not least in moving legal from a safety net to a value creator and growth engine.