Contract management solutions are booming in the US and UK. The Netherlands and the rest of the EU are closely monitoring developments. Previously, contracts where seen as an administrative burden for financial institutions. However, they are increasingly seen as business-critical and with the use of artificial intelligence (AI) on the rise, there are numerous possible applications. What exactly does contract management involve? When can it add value? What does the future of contract management look like? We will go into these questions further in this article.
What exactly does contract management involve?
Contract management is also called Contract Lifecycle Management or End-to-End Contract Management. It means the same thing; a “Contract as a Service” solution for the smart repository, drafting, negotiations and application of contracts and documents within the organization. A financial institution has a business supplier on the one hand and a client / consumer on the other. Both sides can benefit from a single contract system in which the entire contracting process is recorded and followed.
The speed of development of new technologies makes it possible to automate contracts and workflows. A playbook can list the terms and conditions of a contract and provide clear guidance to negotiators. This creates significant efficiencies, including allowing the business to self-serve. Once the automated workflow and playbook are in place, a Legal department can spend their time and focus on more complex and strategic legal issues. Business can focus on operations and have faster delivery of products/services to market without being held up by legal. Through data insights and dashboards, the business can get an up-to-date picture of where the pressure and bottlenecks lie. This gives both management and the Board better understanding of their operations and an increased level of control.
Other advantages are the configurability and user-friendliness of contract management platforms. Platforms, such as EY’s Legal Operations Platform, are also referred to as Low-code and No-code platforms. In short, this means that the platform can be set up and used by someone without IT experience. It also means that the platform can be configured entirely to your own specification and can be integrated into systems and tools, such as Docusign, Outlook or other CRM tools. As a result, the data can always find a way to the end-user.
Where is the value add?
The added value depends on the current structure and design of the contract (and documents) database, including the volume and complexity of the contracts, as well as the repetitive nature of the work. Having a quick scan of the current database can provide insight into where the potential benefits lie, including cost savings and process efficiencies.
Easier and faster compliance with (new) laws and regulations
The benefit of a central repository for all contracts for the purpose of review is not to be underestimated. In the Financial services market where many contracts are entered into, both with business providers and clients / consumers, it is vital to have a quick and easy way to search and identify any irregularities in the contracts, which can arise from the constantly changing laws and regulations.
What does the future look like?
In the long term, it is important to get employees comfortable with working with this technology and platforms. While AI is still underused in these platforms, it is expected that several new use cases will be presented in the coming years. For example, (regulatory) mapping applications that help implement new laws and regulations or a language robot that takes over the life cycle of the contract. This future is closer than we think. As recent as the end of last year, The Guardian published an opinion piece written entirely with the help of AI. This article is here to read. In the foreseeable future, these types of language robots may well be able to drawing up (simple) contracts and notes. Who says we wrote this article ourselves?