Is anything more fundamental to business than a contract?  It’s the tie that binds a company to a client — a mutually-agreed vow that enables the regulated exchange of products and services.

They’re important enough to command an entire category of business software called contract lifecycle management (CLM), an important legaltech tool.   One of the legal workstreams CLM is tailor-made for is regulatory reform.

Justin Ridl, MD, Cognia

Re-shaping contracts to reflect the latest regulatory rules and definitions is a significant challenge for in-house legal teams. When contracts need updating to stay in compliance, letting software handle the heavy lifting can free up resource and head space, allowing GCs to keep their teams focused on value added tasks.

In financial services, regulatory reform consumes loads of resource — especially where derivatives are concerned. Master trading agreements permeate the entire over-the-counter derivatives marketplace, but in essence they are contracts — and have to stay in line with a growing list of regulatory regimes that grow and evolve with each passing year. The initial margin rules for derivatives contracts, for example, are now in their sixth iteration.

To help financial services legal teams manage reg reform, the ISDA has unveiled a tool called ISDA Create. It automates repetitive tasks to streamline even the most complex derivative negotiations helping parties reach timely agreement, allowing a bank to execute a bulk update of thousands of derivatives contracts in a single go.

Instead of having a team of people manually amending master agreements or continually drafting new ones, a few data points can be typed into a dashboard and added to affected derivatives agreements in the system automatically. ISDA Create also has an auto generation tool that creates a contract or amendment and then sends it immediately to a counterparty.

That’s a very compelling offer. But when you consider the IT complexity already weighing down legal departments, is another legaltech solution really the answer?

A recent survey by Thompson Reuters found that in-house teams use 18 types of technology solution on average. That’s a lot of software to learn, apply, integrate, and build processes around. In a focused team with a very high workload, the time available for managing technology is going to be limited.

Point solutions also tend to be designed to do one thing well. I’m certain ISDA Create will handle derivative master agreement documentation well, but it can’t be extended to structured product documentation, loan agreements, NDA’s, or commercial contracts.

So how do you make a versatile CLM solution with broad application across product contract suites deliver value? In the next article we’ll look at the technical and process traps legal teams can fall into when integrating new technologies, with advice on how to avoid them.

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