Let’s face it: Unless you’re a lawyer, contracts can be extremely difficult to understand. And yet contracts need to be understood, as they enshrine business rules, capture risk and reward and define governance for the enterprise.
Historically, this challenge has been considered an inevitable part of business, and companies created complex contract review processes in hopes that contracts were properly vetted before execution (to varying levels of success). Meanwhile, contracts have become more complex as the risk and compliance environment has changed; the advent of the GDPR, Brexit, the FCPA, and a host of other regulations and standards have made things more complex and the risks of non-compliance have exponentially increased.
But what if a company could empower its employees–be they in sales, procurement, HR or the c-suite–to be able to quickly understand the impact that each clause of a contract will have on the company without changing a word of the actual document? With artificial intelligence (AI) and the power of the cloud, this is now possible. With the right use of these exciting technologies, we have the ability to reinvent how we interact with contracts. Among the ways these technologies are doing so is through visual contracting.
What Is Visual Contracting?
With visual contracting, users can utilize AI to extract components of a contract—clauses, terms, obligations and entitlements — and create visual representations of how they interact with one another to provide a holistic view of the document. Want to see how changing an SLA will affect pricing terms? Click and drag a model. Want to see what geographies the contract will be active in, and thus what regulatory protections need to be included? Open up a map.
Visual contracting offers the ability to both simplify our understanding of contract dynamics and deepen it as well. Not just that, a visual paradigm helps us understand the contract’s interactions with its surroundings! Is the pricing tied to the official exchange rate of the US Dollar to the Euro? Is the liability clause tied to doing business in China? How does the contract react when the price of raw material changes? How does this contract depend on other contracts with this supplier? What are the contractual relationships with this customer in different geographies?
When this is applied to your entire contract portfolio, an exciting world full of interesting insights opens up!
With these powerful new capabilities, companies can simultaneously accelerate their contracting, protect against risk, and optimize their business relationships.
Three Aspects to Visual Contracting
There are three aspects to visual contracting:
1. Discovery and visualization of the contract’s structure
Discover clauses, attributes, obligations and entitlements, and visualize the dependencies between them. Use standard icons, images, even videos and external links to explain risks, rewards, company policy, and negotiation positions to help visualize their interplay.
2. A simplified, contextual view of the contract
If you are looking at negotiating SLAs, you should see a different view of the contract – how SLAs will affect penalties, what auditing responsibilities are affected by SLA commitments, etc. If you are a lawyer evaluating contract risk, you should see a much more holistic picture, with liability, jurisdiction, IP rights, termination and similar factors. If you are looking at profitability … you get the picture!
And not just visualization – contract summaries generated using AI and machine learning that are contextual can help people review, approve and act upon contracts much more easily and accurately than ever before.
3. The world around the contract
How does this contract interplay with the outside world? You should be able to visualize which other contracts this supplier has with you, at what stage each of them is at and how they depend on each other. How many customer contracts have this particular liability clause? The identification of patterns becomes much easier if your contract portfolio can be visually represented!
This video demonstrates a few real-life applications of visual contracting available with the Icertis Contract Management (ICM) VisaulizeAI app:
The primary goal of visual contracting is to unlock the data in the contract and help all stakeholders better understand that data and its interplay with the outside world. That can help in better negotiation, a better understanding of risk, better compliance and, ultimately, better business decisions with better outcomes!
Icertis is committed to building contract management software that unlocks the value of contracts, and visual contracting is perhaps the most powerful tool we’ve developed to date to achieve that goal.