Combining artificial intelligence with expert legal knowledge
It is becoming more and more frequent that businesses need to review and evaluate specific provisions in a variety of their contractual arrangements – often with speed and decisiveness. This may be due to a changing regulatory or business environment or even our current global “new normal” which can affect the contractual obligations of the parties. This may lead to potential legal implications and possible economic losses.
As a result, understanding your contractual terms and obligations across your portfolio and being able to quickly assess exposure across your entire contractual relationships, as well as being able to analyse this information at a granular level, can be a huge competitive advantage – particularly when things change suddenly and quick action is necessary.
However, not all businesses are setup for a quick response to a scenario such as this. Locating, sorting and reviewing contracts to determine particular points historically has been very time consuming and costly to businesses – particularly at a time where professional legal costs are rising and capacity is often already constrained. In order to act quickly and efficiently, the contractual data needs to be sourced promptly and in a format that executives can easily use to make decisions. With the above in mind, is it time to source a smarter, more efficient solution?
The future world of data analysis for smart contract extraction and augmentation using an integrated human and machine platform
Looking to the future, leading legal practice will need to follow other sectors and functional areas by moving to a platform-based economy. Platforms that provide a combination of technology (machine) and brain power (human) for future contract analysis, which together create a vastly improved way of working when undertaking contract reviews, will become the norm. Why is this the case? Already A.I. solutions can scan through large numbers of agreements and identify relevant data points quickly, efficiently and accurately. Meaningful data analysis can then be applied by law professionals to those extracted data points, which can assist a business with further understanding their risks and exposure. They can also answer any questions as required – blending both legal and commercial applied thinking, delivered in executable business reporting. A project management layer mixing process, people and technology enablers within the platform provides additional control and support.
By combining human and machine to complete contractual analysis, a business can benefit from the best of both methods – the speed of the A.I. solution along with the expert human, legal knowledge providing oversight of the results.
For optimal analysis, flexibility is key. A platform needs to be adaptable to fit the requirements and circumstances as needed and allow it to be used for a variety of agreement types and contractual provisions, all at potentially far lower costs than conventional reviews – either on a fixed fee basis and on a per contract subscription model.
Exploring a use case – contractual clauses due to unforeseen events
To use our “new normal” as an example, contracts often include clauses which provide a legal basis for excusing nonperformance due to an unforeseen event that is outside of the parties’ control such as a natural disaster. The composition of provisions can vary, meaning that such provisions will need to be reviewed and interpreted on a case by case basis in order to confirm and understand, amongst other things:
• Whether the contract includes any relevant provision;
• What events are covered under such provision;
• Whether any restrictions have been agreed between the parties;
• Whether a specific process required in order to invoke the provision, such as a notice; and
• What the outcome of the provision is (e.g. does it excuse liability for non-performance or does it result in the termination of the contract?)
Having a readily available and robust contractual review process will assist businesses during what can be a stressful situation, where time is of the essence, in understanding their contractual rights where there is non-performance due to an unforeseen natural event.
So what would an integrated contract management technology platform include?
Having worked with numerous organisations of different sizes and varying levels of sophistication and operating models, it is worth highlighting that there is a raft of technology enablers that can also be leveraged to streamline the contract review process. Many businesses have invested in digital contract repositories and process workflows, as well as other enablers, to assist with optimising legal operations and business partnering.
We know that one size does not fit all and that every organisation is unique. The advantage of the platforms now available to us is that they can be used to provide a tailored set of legal services supported by the relevant legal technology, no matter what the operating model is. At its most simple, contracts can be categorised and renamed to assist with organisation. It could then be built upon to leverage an A.I. tool, for example RAVN, to identify and extract the data from the contract which can then be reviewed and analysed by a legal professional as needed. At the more sophisticated end, the platform can provide a far wider set of advanced tools that function across the full contract portfolio and support the business as needed. The options can be made bespoke to the specific business need.
Exploring a use case – business’ existing infrastructure and the LIBOR transition
To use another real-world example, the upcoming LIBOR transitions are requiring institutions to review and amend a vast number of their contracts to update any affected provisions. Rather than manually completing this task, organisations can today use technology tools on a platform to review the full portfolio of contracts to collate the relevant provisions within various agreement types. From that, legal professionals, providing the people enablement of the platform, can analyse and review the extracted data, which consequently allows for an automated document assembly process to occur. From this point, the platform can then use intelligent workflow to automatically send the proposed amendments that have been produced directly to the affected clients, reducing the need for any manual intervention or processes.
Ensuring one version of the truth through an integrated technology solution
While a review of contracts may be a one-off exercise, it is not infrequent for parties to need to review their contract portfolios periodically for a variety of reasons. Completing reviews in a fragmented and isolated way adds an unnecessary financial and operational burden for a business, as the same work is repeated in each review.
We see a growing number of organisations considering an essential pre-step of critical thinking where expert consulting advice is leveraged at the start to ensure all the correct data points are extracted for a far more effective outcome. In addition, organisations often misjudge the time it takes to do the initial processing of data and, unfortunately, there is no shortcut to speed this up if it has not already been done. Setting up a repository from the start is critical in minimising the lag time to do any contract review at a later stage. Where expert thinking is engaged early, on an end-to-end solution basis, irrespective of the complexity, there is a greater opportunity for organisations to maximize the additional details around how to manage their risks in a more appropriate manner or make changes in their processes or contractual terms in order to improve efficiencies and drive business.
Beyond the initial stages, organisations may, with confidence, submit contracts to the platform for analysis, extract data points and then store them for re-use in a repository – allowing further reviews to be completed more efficiently. These do not necessarily need to be a full review of all terms within a contract; a review can be worked around data which is already held in-house and the A.I. can simply supplement it. As the data has already been extracted, the focus can quickly be adjusted as required, whether to concentrate on specific provisions or for a broader review of the contract terms. An additional benefit is that the data can also be used to flow into other systems being used in-house, such as CRM or invoicing systems and can also ultimately be built into a contract management system for a future fit sustainable solution.
The future of contract analysis and management
Moving forward, there is no doubt that our world will continue to throw up unforeseen circumstances that organisations will need to navigate by making rapid decisions through assessing and addressing their contractual exposures. Organisations also need to be able to deal with any longer-term changes or fluctuations in their businesses in order to achieve optimal growth, and the above solutions will ensure this. A modern organisation should be equipped with the capabilities to quickly access necessary information – not only when the unforeseen occurs, but also in order to adapt and change as and when required. This has never been more important. Fortunately, there are sophisticated machine and human capabilities available to provide the platforms to do so efficiently and effectively and these have never been as accessible to law professionals and business users as they are now.
This insight was created to stimulate conversation. We invite you to get in touch with us.