By Dharmarajan Sankara Subrahmanian, Founder & CEO, Impactsure Technologies.
Contract management is an area that poses a significant challenge in banking, financial institutions and enterprise operations. Many times, manual contract processing becomes a bottleneck for efficiency and risk mitigation due to the sheer volume of agreements, varying complexities and the ever-evolving landscape of compliance. Fortunately, the advent of new technologies like generative artificial intelligence (GenAI) offers a transformative solution to streamline and enhance contract management processes.
Imagine a scenario where banks and large enterprises deal with thousands of contractual documents while smaller enterprises deal with hundreds. You may agree that each contract demands meticulous attention to detail, from initial drafting to negotiation, execution and ongoing management. The traditional approach, relying on manual efforts, not only consumes valuable time and resources but also increases the risk of errors and compliance breaches.
GenAI is quickly emerging as a game changer in contract management. It offers a suite of capabilities to innovate the entire life cycle of contracts within banking and enterprises while dealing with their clients. A November 2023 Gartner Inc. survey of 101 procurement leaders found that GenAI was expected to have the most impact on sourcing and contract life cycle management over the next 12 months.
AI can have an impact in different aspects of contract management:
1. Automation And Efficiency
GenAI leverages AI, machine learning (ML), neural networks, natural language processing (NLP) and optical character recognition (OCR) technology to extract and scrutinize critical data from contracts swiftly and accurately.
We worked with a major banking institution to implement a GenAI solution to analyze legal documents and extract important data points. The tool helped automate the review of thousands of commercial credit agreements, which took around 360,000 hours of manual labor annually earlier. The implementation resulted in significant time savings and reduced human error.
2. Risk Management And Compliance
AI-powered contract management solutions help comply with regulatory standards and mitigate risks effectively. They facilitate in monitoring modifications, changes and amendments in laws and regulations across different jurisdictions and country-specific regulations. AI algorithms can automatically update contract templates and clauses to align with the latest legal requirements.
3. Streamlined Negotiation And Collaboration
AI facilitates seamless collaboration among contract negotiation and review stakeholders. Advanced NLP algorithms enable real-time analysis of contract terms and conditions, identifying potential areas of contention or ambiguity.
A multinational company adopted our AI contract review platform to streamline contract negotiations, allowing it to compare contract terms against the company’s predefined legal policies. This significantly sped up the review process and reduced the time to finalize agreements by 80%.
4. Cost Efficiency And Resource Optimization
Automating repetitive tasks and streamlining workflows using AI and GenAI helps significantly reduce the operational costs associated with contract management.
We worked with a professional services firm to implement an AI-driven contract management solution to handle a huge magnitude of client contracts. It automated the extraction and review of key contract terms, reducing the need for manual intervention and allowing the firm to reallocate resources to more strategic tasks. The result was a 50% reduction in contract processing costs.
5. Enhanced Governance And Transparency
The AI-based approach introduces a layer of governance and transparency into the contract management process, giving stakeholders visibility at every stage of the contract life cycle.
At Impactsure Technologies, we’ve helped clients of banks generate guarantees and contracts through preapproved clauses in a matter of a few seconds without the need to go through a complex process of vetting that would have otherwise taken many days. It not only enhances the customer experience but also makes it easier to manage the processes efficiently. The clients are able to manage their contracts well, manage the content, ensure appropriate vetting and scrutiny are done effectively, manage the timelines, and incorporate the electronic signing options in a seamless way.
As contract management complexities continue to increase in the banking and enterprise sectors, the adoption of GenAI emerges as strategically crucial for organizations seeking to enhance operational efficiency, mitigate risks and maintain regulatory compliance. By harnessing the power of AI-driven automation, banks and enterprises can streamline contract processes, optimize resource utilization and confidently navigate the complicated legal landscape.
A combination of GenAI, NLP and ML represents a paradigm shift in contract management, empowering banks and enterprises to easily manage the complexities of the modern business environment with agility and resilience. By embracing AI-driven solutions, organizations can unlock new opportunities for growth, innovation and sustainable success in an increasingly competitive and rapidly evolving environment.
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