It is understood that across the world around 60% of the medium to large scale enterprises are handling contracts manually using word templates or excel spread sheets. Word templates are basically used to draft the contracts including necessary clause redlining and commenting and once authored these contracts are scanned and stored in various repositories across the organization. Depending on the nature of the organization and their business model sometimes these contracts are consolidated and stored in a centralized repository like SharePoint where different department users have access depending on their privileges
Having all these executed contracts in one central repository does enable quick access to contracts but it will not help in tracking the important metadata stored in these contracts as all these scanned contracts are inherently non searchable. The only way to keep track of the important information within the contracts like renewal notice period, payment terms, force majeure, penalties, and damages etc is to maintain an excel spread sheet and keep updating with this metadata across the contracts.
So, unless someone proactively looks for the information within the excel spread sheet there is otherwise no visibility of key information and this can prove highly futile to organizations
What are the major concerns with contract management if there is lack of visibility?
Poor Contact management by adopting to manual contract processes and using Excel to store key metadata from the contracts can trigger risk and compliance issues. Here are some of the major concern’s organization would need to deal with if they do not have contract visibility
Locating the right contract
When you are storing thousands of signed contracts in distributed repositories and depending on excel to find key metadata, there are possibilities where multiple versions of a particular contract are existing across the organization network and even if you are able to locate the metadata of the contract you are looking for from the excel sheet it is not an easy task to unearth the actual contract document associated with this metadata. It is possible that you are getting your hands on a contract that is not the most recently updated and using the information from that contract can pose unnecessary challenges
Understanding contract deviations
When manual contract management processes are adopted it is not possible to know if all the signed contracts have strictly followed the organization’s standard legally vetted templates and if there were any changes made to the clauses before signing with a particular party. Though it is not common to change the clause languages it is quite possible to agree to a certain amount of changed language in some of the clauses as per the other party’s request to make business possible. However once contracts are signed and stored no one keeps a track on these custom agreed terms and gets into the mode of “out of sight = out of mind”. This can result in organizational risk
Different teams within an organization must deal with contract compliance. People from procurement often need to work on decreasing or limiting unnecessary spend, validate, and filter suppliers and track performance metrics. On the other hand, your legal teams want to ensure that all company wide contracts are as per the regulatory needs. Sales department on the other hand has the need to use the latest and approved language in their contracts. Unless you have the mechanism to identify the deviations in your contracts it will be difficult to comply with regulatory requirements
How technologies like Artificial Intelligence can improve contract visibility?
To get visibility across your contracts it is first important to digitize the contracts. Here are some of the way’s technologies like Artificial intelligence and related areas like Machine Learning, Deep learning, NLP and OCR can help improve contract visibility
Digitizing Data from Scanned Contracts
Technologies like Object Character Recognition (OCR) helps in digitizing information from scanned bitmapped image into machine readable text. OCR process is combined with deskewing algorithms also have the capability to extract data from skewed or noisy images
Automate metadata extraction from digitized contracts
Natural language processing techniques coupled with semantic intelligence algorithms are used to obtain intelligence and key metadata from the digitized contracts. This process is further perfected and improved by training the ML models on a set of sample documents to identify key clauses of interest.
Spot non – standard language in seconds with AI
Artificial intelligence can help legal departments of organizations or any legal consulting firms specialized with contract reviews in speeding up the process of reviewing key clauses of interest to understand any major deviations from the standard language. This will help in staying on top of risk assessment and avoid possible future legal disputes
If you are part of an organization that is dealing with lot of contracts with vendors and suppliers and having contract visibility issues then it is time you consider contract analytics software that is powered with technologies like Artificial intelligence and machine learning to immediately improve visibility across your contracts repository and be on top of your contracts
Contact us today to schedule a platform demo
This post first appeared on Smart Contract Analytics | Contract Discovery And Analytics Platform, please read the originial post: here