In today’s contracting, in-house attorneys need to know what is in the bulk of their agreements. They need to be aware of every single detail – and be able to turn to them for all of the answers. But the sheer volume, velocity, and complexity of a contract database make it challenging to track, let alone manage, all of those details.
Now, more than ever, analytics technologies are being applied to the legal sector, using advances in artificial intelligence (AI), machine learning, and cognitive computing. Data analytics are changing the way legal professionals think and the way they do business altogether. Such legal analytics draw insights from large volumes of contractual data, helping in-house attorneys make data-driven decisions on which to build all important legal strategies. This means keeping track of pertinent contract details, like key performance indicators (KPIs), and risk and obligations. By effectively managing legal tasks and contractual risk across the business, AI-based contract analysis serves to optimize legal operations as a whole.
With this in mind, here is how advanced contract analytics are transforming the legal landscape, helping general counsels (GCs) and legal teams include data in their day-to-day decision-making.
Contract Analytics Technologies at a Glance
AI-driven legal analytics – also known as augmented analytics – is the discovery, interpretation, and communication of valuable, actionable insights when it comes to legal data. Today, the application of data-driven analytics is not only essential to the legal department, but the entire business as well. Put simply, legal teams need analytics to remain competitive in a quickly-evolving sector. They are under tremendous, unrelenting pressure to deliver legal services efficiently and effectively, and even offer brand-new services without raising costs. They must show their value through data-driven strategies and insightful counsel, not to mention positive legal outcomes.
The good news is that data analytics has had a major impact on a myriad of industries already. For instance, the finance industry takes full advantage of advanced statistical modelling. With this, it can personalize things like credit cards, identify and mitigate areas of risk, and forecast business performance, as well as explore possible revenue streams and maintain total budgetary control. Health-care, energy, retail, insurance, and travel industries regularly use analytics to gain organizational insight and improve business results, too.
And now, there is real-life evidence that data analytics can help legal practitioners meet similar business goals. In fact, it has the potential to digitally transform legal – and other – departments within companies.
Many legal departments spend a significant amount of time on contract reviews and negotiations. Contracts tend to include standard terms and conditions that are often the main focus of a contract review or negotiation. Fortunately, contract review AI tools complete analysis of proposed contract terms. These tools figure out what proposed terms of a contract are acceptable, and which ones are not. Nevertheless, AI tools have not replaced contract review by attorneys. Instead, they allow for the complete identification and review of potential errors – before agreements are finalized by legal teams.
Contract performance and analytics are another matter. When an agreement is in place, it can be challenging to keep close tabs on contract performance to ensure that agreed-upon terms and obligations are met. This is especially true for companies that have many active contracts among several different parties. But just like contract review AI tools, those focused on performance and analytics extract and visualize key contract terms. They then compare terms with a company’s metrics, determining whether or not agreement terms and obligations are being met properly.
Ultimately, such AI tools allow legal teams to use the mounting data contained in company contracts – to compile analytics, assess overall contract performance, and produce custom reports.
Better Analytics Through AI:
By its very definition, AI-driven analytics leverage technologies like machine learning algorithms and natural language processing (NLP). It helps automate data management processes and assists with the heavy lifting of analyzing contractual data. It pinpoints hidden patterns within large data sets, uncovering important trends and actionable insights.
By the end of 2024, nearly three quarters of enterprises will put artificial intelligence into action, according to Gartner. And this will increase the streaming of data and analytics infrastructures fivefold. Further, AI capabilities are expected to augment analytics, allowing legal departments to internalize data-driven decision-making, while empowering everyone else in the organization to handle that same data. This means AI will go a long way in the enterprise-wide democratization of data.
The Whole Truth of Your Contracts
As stated above, the best contract-specific analytics assist legal functions. They accurately measure achievements —and their alignment with critical business-wide outcomes. They enable legal teams to set and track results against their own metrics-based business goals. They allow leaders to quantify the true value they contribute to their organizations. In essence, this value is their full support of overall business goals.
From a contract analytics point of view, contract management software — with deep legal analytics — provide macro and micro visibility — or insights — into the totality of contract databases. Typically, they include the following key features:
*Provide macro and micro visibility into complex metadata across the contract database
*Support the identification and analysis of contract database trends, and inform business decisions
*Quantify and benchmark contracting processes and goals against KPIs, and measure achievements
*Identify the gaps in contract management systems and optimize legal operations
*Facilitate the reduction of risk through insights on core contractual risk drivers
To this end, analytics dashboards provide a picture of contracts’ risk profile and show how to reduce exposure for different risk drivers. Examples of dynamic dashboards supporting in-house legal teams include:
*Contract risk analytics: A risk profile of a company’s entire contract portfolio, including drivers of risk and how to go about reducing that risk
*Obligation analytics: A view of the obligations and metadata across all agreements, including sub-groups of contracts (e.g. customer and supplier)
*Key performance indicators: Insight into how well a legal department is performing against their individual team goals and preferred business outcomes.
Contracting in the Information Age
In this relatively-new information age, analytics technologies will only accelerate. More and more enterprises will adopt and implement AI-based contract management solutions, and integrate legal analytics into its workflows. Legal departments will leverage vast amounts of information to make more intelligent, data-driven decisions, become more productive as business units, and achieve better business outcomes — in a variety of scenarios.
After all, the scale and complexity of today’s legal data is more than in-house attorneys, alone, can manage. And without such ‘mile-wide-inch-deep’ analysis, risk and exposure for the legal department may be higher than any one company can afford.
Anurag Malik is the Chief Technology Officer at ContractPodAi. Anurag’s focus is building the next generation of an AI-driven dominant technology platform in the contract management space. Read his executive bio here.
