Part 1 (4-part series) on How AI and ChatGPT Can Be Applied to Contract Management
The advent of artificial intelligence (AI) has revolutionized various industries, and contract management is no exception. AI brings a range of capabilities that can streamline and enhance the contract management process. From metadata extraction to on-demand clause creation, AI empowers organizations to improve efficiency, reduce risks, and gain valuable insights.
Contracts 365 has partnered with World Commerce and Contracting (WorldCC) to deliver a 4-part webinar series on the impact of ChatGPT on contract lifecycle management (CLM). Below is an excerpt from our first webinar, Applying Artificial Intelligence to Contract Management, where we explore ten practical ways in which AI can be used to improve the contract management process. In addition, we evaluate the current level of maturity of each feature and the potential value that it provides to organizations. We feel it is important to define these ten distinct areas so that organizations can prioritize their needs and better evaluate contract management software vendors that utilize various levels of AI in the contract management process.
1. Metadata Extraction
AI enables the automatic extraction of key metadata from contracts without extensive model training. This includes extracting information such as parties involved, effective dates, termination clauses, and payment terms. AI-powered tools can also assist in visualizing, validating, transforming, and placing the extracted data, simplifying contract management. This feature is fully developed and available for use today while also providing high value to organizations by positively impacting workflow and providing value through alerts and escalations.
2. Clause Comparison & Risk Rating
By leveraging AI, organizations can automatically categorize clauses and perform comparative analysis against standard clauses. AI algorithms assess the complexity and associated risk of counterparty-suggested language, allowing legal teams to identify potential issues more efficiently. This capability streamlines the contract review process and helps prioritize high-risk clauses. Although the potential impact on an organization is high, this feature is still not mature, meaning that its use will require more diligent oversight until it is further developed.
3. Clause Extraction
AI facilitates the extraction of specific clauses that meet predefined criteria, enabling organizations to create a data construct for easy retrieval and management. This feature supports clause-specific approvals, reporting, analytics, alerts, and escalations, enhancing contract governance and compliance. Although this feature is moderate in maturity and value, look for it to progress quickly as it builds on the success of metadata extraction.
4. Obligation Extraction
With AI, organizations can automatically extract obligations from contracts and capture key data attributes. This information is then available for automated obligation tracking, jeopardy management, and reporting. AI-powered contract management tools help identify critical obligations, ensuring they are met in a timely manner. Although this feature can provide significant value to your organization, the maturity level of this feature is currently moderate. This means it requires manual oversight and management within a mature contract management process.
5. Contract Summarization
6. Contract Language Translation
AI-powered translation tools offer on-demand contract translation between languages. However, it's important to note that while AI can assist with translation, the accuracy may vary due to local colloquialisms and linguistic nuances. Therefore, a validation process should be implemented to ensure the integrity of the translated contract. (High maturity/low value)
7. Contract Analytics & Automation
AI-based contract analytics enable advanced search capabilities, allowing organizations to find relevant contract information quickly. By feeding the search results into automated actions or workflows, organizations can automate tasks such as amendments, compliance checks, and e-signature integration. This integration streamlines contract management and reduces manual effort. This feature is currently moderate in maturity but will provide significant value as it develops.
8. AI-Influenced Workflow
AI can observe workflow patterns and actively or passively adjust workflows based on pre-defined patterns. For example, if a standard contract consistently bypasses a legal review without issues, AI can suppress the legal review task and document the decision in the audit history. This AI-influenced workflow improves efficiency and reduces unnecessary review cycles. Look for this feature to progress a bit slower as it is still in a stage of low maturity.
9. On-Demand Contract Generation
AI-powered chat interfaces, like ChatGPT, can be utilized to initiate the creation of draft contracts on demand. The on-demand portion is delivered by exposing an in-context command prompt to GPT. The contract professional can then issue command prompts with refinement. When the correct content is produced, it can be saved into a secured area for additional review cycles via workflow. In addition, these drafts can be converted into modular and standardized templates. By leveraging AI, organizations can streamline the contract creation process and facilitate additional review cycles via workflow, enhancing collaboration and efficiency.
10. On-Demand Clause Creation
Like on-demand contract generation, contract professionals can leverage AI to dynamically create new clauses during the review process. By accessing AI tools and in-context prompts to GPT, they can interactively refine and generate new clauses based on specific requirements. This capability enables contract teams to adapt and customize agreements efficiently, improving contract quality and compliance.
The use of AI to power the contract management process offers significant benefits. From automating mundane tasks to extracting critical information, AI streamlines contract management, reduces risks, and improves efficiency. However, not all AI is created equal. We hope that this information helps you to understand the level of AI maturity, the potential value to your organization, and a way to better assess contract management software's use of AI in each target area.
Contracts 365 –Leading Contract Management Software for Microsoft 365 Customers
Contracts 365 has leveraged Microsoft and its AI capabilities to bring new innovations to the contract management community. If you’d like to learn more about how our AI-powered contract management software can improve your contract management process, please don’t hesitate to reach out to us or, even better, request a demo, and we can show you how it works in real-time.