The future of con­tract man­age­ment in Fin­an­cial Ser­vices

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Published 22 April 2021 Reading time min Author Rod­er­ick Buijs Financial Services

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.

 

Auto­mated approach
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.

 

User-friendly
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?