NEW REPORT: The State of CLM and AI-Powered Contract Intelligence

Using AI to Zap Contract Risk in the Energy and Utilities Sector

As one of the world's largest and most highly regulated industries, the energy and utility sector (E&U) contends with a long and growing list of risks.

May 15, 2024 By Bryan Baum and Susan Becker

The energy and utility sector (E&U) is one of the biggest and most regulated industries in the world, and it faces many and increasing risks.

In addition to the multiple layers of national, regional, and local oversight, E&U companies face regulatory challenges such as Voluntary Carbon Markets (US), the Energy Act 2023 (UK), and the Building Energy Act (Germany), as demands for sustainability continue to evolve and escalate. Many energy companies are going even further with their own commitments, for example, by pledging net-zero emissions by 2050.

To meet these commitments and stay compliant, E&U companies need both a centralized view of operations today and tools to effectively steer operations in the future. Such capabilities are impossible without digital transformation. Experts like Deloitte note that to keep up with energy regulatory trends, companies “should continue to modernize and rationalize their regulatory, legal, and compliance functions and practices.”   

The role of CLM in compliance 

One of the biggest compliance challenges for E&U companies is ensuring contractual compliance. For example, in the oil and gas industry, there are thousands of contracts between nearly countless suppliers, each of which the business must ensure aligns with regulatory and internal requirements.  

Every supplier relationship is defined by commercial agreements. But it can be an incredibly time-consuming and labor-intensive process for contract managers to manually review each document to ensure obligations are being met.  

It can be an incredibly time-consuming and labor-intensive process to manually review each document to ensure obligations are being met. Thankfully, AI can help.

Fortunately, Contract Lifecycle Management (CLM) with AI and obligation management features can do the heavy lifting, streamlining processes and ensuring contracts are always compliant. Such CLM can also detect, organize, and administrate the obligations that a manual contract review might miss.  

CLM can help contract managers keep up with the rapid and near-constant regulatory changes by automating the amendment process. As new regulations are enacted, AI can identify which contracts are affected, expediting the work of contract managers who can then make the necessary amendments. Best-in-class CLM solutions can even then track the execution and completion of these amendments across suppliers and partners. 

It’s game-changing just how much AI – especially the growing roster of generative AI capabilities – can help E&U companies facilitate compliance. AI can scan and discover any non-compliant clauses across thousands of contracts in a fraction of the time it would take humans to do the same – saving valuable human resources for more strategic efforts. All of this happens in a single, centralized platform creating a single source of truth for the E&U company’s contract risk profile.  

5 ways AI can reduce compliance risk 

There are many essential activities for improving compliance governance, including compliance audit and compliance training. But technology, especially AI-augmented technology, can play a big part. Let’s explore five specific ways that an AI-powered CLM platform can help E&U companies reduce compliance risk: 

  1. Creating an AI-powered central contract repository — Make sure that all contracts, and their clauses and conditions, can be easily searched in one location using natural language, with tracking and management across their entire lifecycle.
  1. Streamlining discovery — Create a process for using AI to review and approve contracts before they are signed, identifying in advance any risks or non-compliance with regulations or company policies.
  1. Advanced AI search and trace — Aid  compliance audits by having AI regularly search contracts and the clauses within them to identify any potential issues while ensuring they are being adhered to. 
  1.  Automating obligation management — Use AI to identify and extract specific obligations from contracts and track them to fulfillment, including regulatory filings, insurance, hazardous materials disposal, ESG reporting, and more.
  1. Efficient regulatory updates — Ensure that processes run smoothly during contract updates when required due to regulatory changes (or new commercial terms). By using AI to automate bulk amendments and approvals processes across stakeholders, organizations can free up hundreds (or thousands) of hours of work for more strategic efforts.

The energy and utilities sector gets more complicated by the day. By using a CLM tool with AI capabilities to track contracts across their lifecycle, provide real-time alerts of potential compliance issues, and automate any required amendments, E&U companies can more confidently meet their obligations while saving millions through streamlined revenue operations and efficiencies. 

To learn more about how you can zap contract risk and power-up compliance, visit our industry pages for energy and utilities.

Icertis Contract Intelligence for Energy

Missed Obligations Can Cost Energy and Utilities 5% of Revenue. Contract Intelligence Can Help.

Modern contract management technology can take contract information—billings rates, reporting obligations, payment terms, etc.—and transform it into structured data that can be connected across an organization, so the value of every contract is fully realized.

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