AI is dominating the news with major breakthroughs and scares happening nearly every day. Just recently, the “godfather of AI” blew the whistle on how smart the technology is becoming. While the anxiety around automation taking jobs away from people feels very real, the truth is that automation and AI promises to deliver huge benefits to the operational efficiency of in-house legal teams.
Many organizations are already planning to automate more legal work related to major corporate transactions by 2025, so it’s probably better to view AI as a supplement, not a replacement; something that helps with the time-consuming, administrative tasks that are needed to run a business, but eat into the time you spend on the profit-making parts of your business.
One area where it holds a great deal of promise is contract lifecycle management (CLM. ) CLM is a way that organizations can track and manage a contract from its initial request through its execution and onto its possible renewal, amendment, addendum or termination. Even with all the hype around CLM and AI, there are currently three very practical, real-world use cases of how legal professionals can use AI today.
These include:
- Quickly digitizing the organization’s contracting efforts. For companies using traditional methods to manage legal agreements such as shared folders or spreadsheets, one of the biggest barriers to digitally transforming their contracting efforts and adopting contract management software is getting all those agreements into a centralized cloud-based system. AI, and more specifically, automated data extraction, allows them to digitize and extract data from contracts in seconds to minutes. Natural language processing (NLP) with learning algorithms enables the AI to intelligently identify and extract key information in contracts and documents such as important dates like expirations and renewals, contact information including addresses and names, contract terms, values and other contractual data points. Organizations can upload all of this information into a centralized repository without having to manually enter contract information. This saves a tremendous amount of time, resources, and eliminates the potential for human error.
- Visibility into all legal language and contracts. Optical character recognition (OCR) was one of the earliest forms of AI. With all contracts centralized in one system, an organization can use OCR and cognitive search capabilities to automatically index, locate, and report on contract language and information. This allows all the data in their legal agreements to be instantly searchable and reportable for business intelligence and compliance purposes. This enables organizations to answer contract-related questions with the click of a mouse such as what agreements have an indemnification clause, or contain other specific legal language and terms.
- Advanced contract analytics. Perhaps the most compelling use case for AI and enterprise legal management (ELM) is its ability to give organizations real-time insights about contract and contracting process performance. Advanced analytics allow organizations to track metrics like average number of days in a contract lifecycle; average time to achieve contract milestones like requesting, drafting, negotiating, approving and signing contracts; ratio of complete, outstanding and missed contract obligations; and total dollar value and volume of active contracts by type, organization, risk profile and more. This allows them to take control over contract processes and set KPIs that improve, perfect and minimize risk.
While many organizations are looking for the sexiest and most exciting ways to use AI, these practical CLM use cases show that picking a problem that is solvable and seeing where AI can help is more beneficial in the long run. Data shows that corporate legal departments will capture only 30% of the potential benefit of their CLM investments in the near future.
Rather than focusing on changing the world, these organizations should invest in AI to help with practical CLM tasks such as data entry, contract creation, data extraction and managing important dates. The intelligence and insights this process will provide makes it easy to leverage contract data to not just uncover hidden risk, but also opportunity.
