When ChatGPT became available in 2023, it captured our collective attention, introduced the term "Generative AI" to the world, and ignited a storm of innovation across business sectors. As large language models (LLMs) become more ubiquitous, it's fascinating to see the ongoing innovative ways businesses use the technology. One area that is particularly changing fast is the use of generative AI in contract management.
In a 2024 AI in Contracting Report representing some of the largest companies, 56% of CEOs believe AI will spur greater business competition by minimizing gaps between competitors, and 80% of executives expect AI to impact their bottom line within the next five years. And 55% of these companies plan to train their workers on AI in 2024. What's more? Nearly 80% of legal and procurement professionals say they are personally enthusiastic about generative AI.
What is generative AI?
Artificial Intelligence has increasingly become the must-have technology for businesses to increase revenue, reduce costs, and stay ahead of the competition. This is even truer for companies that rely on modern contract management technologies to manage their business agreements.
Generative AI is a branch of artificial intelligence that can create new content or data from existing ones. New content it can create includes text, images, or other media in response to prompts. It can use natural language processing (NLP) and deep learning techniques to analyze, understand, and generate natural language texts. Simply put, generative AI creates new content by using existing data, like text or summaries, and increasingly images and videos.
What's the Difference Between Generative AI and Traditional AI?
Traditional AI, also known as Narrow AI, specializes in intelligently tackling specific tasks. These systems are designed to process particular inputs and can learn from data to make predictions based on it. This AI excels at following established rules and performing specific tasks efficiently but doesn't create anything new.
Generative AI, by contrast, is the next frontier in artificial intelligence, and it excels at producing entirely new and original outputs. Based on its input data and sophisticated statistical models, generative AI predicts and generates new data with similar characteristics. Simply put, generative AI is AI!
Read on to discover what this will mean for modern contract management.
How will generative AI change contract management?
Contract lifecycle management (CLM) is a contract management process that involves drafting, reviewing, negotiating, and executing legal agreements between parties. It can also entail monitoring compliance, performance, and risk throughout the contract lifecycle.
Traditionally, contract management relied heavily on manual processes, with legal teams spending countless hours drafting, reviewing, and negotiating contracts. These methods, while effective, were often laborious, inefficient, and susceptible to human error. However, with the emergence of generative AI, the contract management landscape is profoundly changing.
Generative AI was made for contracts
By automating tasks, mitigating risks, and providing valuable insights, it empowers companies to navigate the ever-complex world of agreements with greater efficiency and confidence.
With the ability to interact conversationally with natural language, large language models can quickly summarize contracts and classify their components. Components such as pricing information, clause attributes, expiry dates, etc., can be extracted from lengthy contracts within seconds and presented to the user.
In short, generative AI is very good at summarizing long texts. Think about how much time can be saved if you can just ask a chatbot when your contract expires!
Streamlining Contract Creation
Imagine generating a legally compliant, customized contract in minutes. Generative AI makes this a reality. By analyzing vast datasets of existing agreements, these systems can learn the nuances of legal language and generate drafts tailored to the specific contract type, vendors, and a company's playbook. This saves time and resources and reduces the risk of errors and non-compliance.
Contract negotiations can be complex and time-consuming. Generative AI can quickly surface risk in clauses that do not comply with company standards. This makes it easier for negotiators to determine what parts of a contract require redlines based on risk criteria. Contract reviews and redlines are faster, and contract risks are reduced. Generative AI can even analyze past agreements and outcomes, surface clauses that worked optimally, flag risky clauses, and suggest alternatives according to a company's clause library and standard playbook. This gives negotiators valuable insights, leading to faster resolutions and more favorable terms.
Certain CLM technology offerings have also been trained on contract attributes specifically to identify different clause types. That can be very useful when reviewing a high volume of contracts - think of portfolios of contract types like NDAs or master service agreements for a business division, for example. With generative AI, legal and non-legal professionals handling contracts can easily understand their commercial agreements and act.
Risk Detection and Compliance
Contracts are riddled with potential risks and compliance pitfalls. Generative AI can quickly scan agreements, identifying hidden risks, ambiguous clauses, and potential non-compliance issues. This proactive approach allows companies to address issues before they become problems, saving money and mitigating legal risks.
Unlocking New Insights
Generative AI goes beyond automation. It can unearth hidden trends and patterns by analyzing vast amounts of contract data. The data that would otherwise stay siloed and hidden in charts and tables or deep within the contract, can be surfaced readily by a simple chat. This provides companies invaluable insights into their contractual landscape, enabling them to make informed decisions and optimize their agreements.
Summary of Generative AI benefits for managing contracts:
- It can improve contract compliance and quality by minimizing errors and risks and ensuring alignment with the parties' goals and expectations.
- It can accelerate contract review cycles by as much as 40% by optimizing terms and conditions, standardizing clauses, and flagging non-compliant clauses intelligently.
- It can enable companies to innovate and adapt to changing markets by surfacing new insights from their contract data.
To learn more ways to successfully incorporate generative AI into your contract management process, read the insider tips here.
Does the Icertis Platform offer Generative AI capabilities?
Yes, it does! Introducing Icertis Contract Intelligence Copilots. Icertis Contract Intelligence Copilots revolutionizes contract management by providing professionals with assistive, generative, natural language capabilities that cut through legal-ese to deliver insights, accelerate contract reviews, and more to drive your business forward. Built on the Icertis ExploreAI Service, Icertis Copilots keep your valuable contract data safe and secure.
You can use it to review and summarize lengthy contracts in fractions of a second, flag non-compliant terms intelligently, suggest improvements, and negotiate better terms.
Some benefits of using Icertis Contract Intelligence Copilots are:
Free up your time for deeper strategic work
Icertis Interactive Insights Copilot creates concise summaries of lengthy contracts, highlighting key terms, conditions, and obligations. This makes it easier for stakeholders to review and understand the critical sections of a contract without reading the entire document. With this lightning-fast capability, contracting professionals can reduce lengthy and expensive legal review cycles.
Get your contract questions answered intelligently on the fly
With Icertis Copilots, you can use natural language prompts or keywords to generate contract clauses that match your requirements. You can use the interface to check for specific clauses such as indemnity, liability, and terminations. Or you can request alternative clauses be generated based on your organization's guardrails and playbooks. Here are some sample questions the interface has intelligently answered:
- How long do contracts of this type take to get approved?
- When does this contract expire?
- Do we have any other SOWs with this vendor?
- What ESG policies do we require suppliers to include in their contracts?
- In which countries are these clauses always negotiated?
And more. Icertis Copilots’ natural language prompts enable you to surface new insights instantly that may have previously taken hours to analyze manually.
Surface what matters to you, when you need it
The Icertis Risk Assessment Copilot parses and reviews attributes in all contract agreements. This enables it to intelligently trigger alerts and interventions when a particular attribute in the contract is beyond the threshold value allowed by the business. Such as when a contractual value or payment terms in a SoW (Statement of Work) exceeds a certain threshold.
By alerting companies to these real-time insights, generative contract AI delivers real, tangible savings to enterprises, often on the scale of millions of dollars.
Automate high-volume contract reviews
An AI-powered CLM tool compares contract attributes against your specific risk criteria to ensure that required clauses and approved language are present in every agreement. Icertis Risk Assessment Copilot earmarks agreements that don’t require further review and identifies and helps you address missing or noncompliant attributes so you can focus on growing your business.
Secure and responsible AI
Generative AI does not replace human expertise or judgment in contract management. Rather, it is a powerful tool that can save time, augment human capabilities, and enhance human decision-making. ExploreAI by Icertis is built on Microsoft Azure Open AI, which offers a comprehensive approach to security and privacy and ensures your company’s valuable security, compliance, and privacy policies and processes remain intact. Icertis is committed to ensuring AI systems are developed responsibly, work as intended, and are used in ways people can trust.
With Icertis Contract Intelligence Copilots, powered by generative AI, contract managers can focus on essential tasks while ensuring top-quality contracts. To see the Icertis Copilots generative AI capabilities and how that can transform your business, request a demo.