How Generative AI is Changing Contract Management

In 2023, ChatGPT made itself available to the public, grabbing our interest and popularizing the phrase "Generative AI" while sparking a wave of innovation across several industries. The increasing ubiquity of large language models (LLMs) makes it interesting to observe the creative ways in which companies are utilizing this technology. The application of generative AI to contract management is one field that is evolving especially quickly.

According to a 2024 AI in Contracting Report including some of the biggest names in industry, 80% of executives anticipate AI to influence their bottom line in the next five years, and 56% of CEOs think it would increase corporate competitiveness by narrowing gaps between rivals. And by 2024, 55% of these businesses intend to provide AI training to their employees. What's more? Approximately eighty percent of procurement and legal professionals claim to be personally excited by generative AI.

What is generative AI?

A subfield of artificial intelligence called generative AI is capable of producing new data or content from preexisting ones. In reaction to cues, it can produce new text, images, or other types of material. It can evaluate, comprehend, and produce natural language writings using deep learning techniques and natural language processing (NLP). In short, generative AI uses pre-existing data—such as text or summaries—and increasingly, photos and videos to produce new content.

How will contract management change by generative AI?

Simplifying Contract Creation

Imagine being able to create a personalized contract that complies with the law within minutes. This becomes possible with generative AI. These computers may identify legal intricacies and produce drafts that are customized for a company's playbook, vendors, and the particular contract type by examining enormous datasets of already-existing agreements. Error and non-compliance risk is decreased, and time and resources are saved.

AI-Assisted Negotiation

Negotiating a contract can be difficult and time-consuming. Clauses that do not meet organizational standards can have risks swiftly identified using generative AI. This facilitates the process by which negotiators identify, depending on risk factors, which sections of a contract need redlines. Contract risks are decreased and redlines, and reviews are completed more quickly. In addition, generative AI may identify dangerous clauses, examine previous agreements and their results, highlight successful clauses, and provide alternatives based on a business's clause library and typical playbook. This provides insightful information to negotiators, resulting in quicker resolutions and better terms. A few CLM technology products have also undergone contract attribute-specific training to distinguish between various clause kinds. When examining many contracts, that can be very helpful. For instance, consider portfolios of different contract kinds, such as master servicer agreements or NDAs, for a company division. Professionals handling contracts, both legal and non-legal, may quickly comprehend and act using generative AI.?

Automated Contract Reviews

Generative AI can revolutionize contract review by using machine learning to analyze contracts at superhuman speed, highlighting key terms, risks, and summarizing key points. It can further assist by suggesting edits, redlines, and even alternative clauses to strengthen your negotiating position, all based on company policies, industry standards, and past successful negotiation strategies.

Risk Detection and Compliance

There are several possible hazards and compliance traps in contracts. Agreements may be swiftly scanned by generative AI, which can then notify the reviewer of any potential non-compliance concerns, unclear language, and hidden hazards. By taking a proactive stance, businesses can prevent problems before they arise, saving money and reducing legal risks.

Unlocking New Insights

Beyond automation is generative AI. Through extensive contract data analysis, it can uncover obscure trends and patterns. With only a little talk, information that would typically remain compartmentalized and concealed in tables, charts, or deep within contracts can be exposed. Businesses can use these vital insights into their contractual environment to better understand their agreements and make well-informed decisions.

Generative AI benefits

• By reducing mistakes and risks and guaranteeing alignment with the objectives and expectations of the parties, it can enhance contract compliance and quality.
• By standardizing provisions, intelligently detecting non-compliant clauses, and optimizing terms and conditions, it can cut down on contract review cycles by up to 40%.
• By bringing fresh insights from their contract data to light, it can help businesses innovate and adjust to shifting market conditions.