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Friday, 13 May 2022 00:54

Four ways AI is transforming contract lifecycle management for organisations

By Sanjay Kadkol, technical account director at Jaggaer

GUEST OPINION: Contracts are the foundation of all business relationships. In procurement and supply chain management where agreements with suppliers underpin the entire function, how well these contracts are managed can have a significant impact on business performance.

Without proper contract lifecycle management (CLM), businesses are exposed to countless risks, financial penalties, and compliance issues. Yet it remains one area organisations are still investing significant time and money in manual and repetitive processes.

As global supply constraints and supply disruptions, combined with talent shortages are forcing organisations to fundamentally re-think the way they do business, finding opportunities to optimise processes has become increasingly critical.

With the autonomous commerce revolution gaining momentum, organisations are coming to terms with the importance of automating CLM and leveraging technologies like artificial intelligence, machine learning and analytics to drive efficiencies, mitigate risk and ensure compliance is always met. JAGGAER is already utilising advanced technologies to transform procurement and supplier relationships and is now extending this capability into intelligent contract management with the acquisition of contract analytics company DocSkiff.

With the global market for CLM software growing at an annual rate of 16.9% and set to hit US$3.84 billion by 2026, there is a significant opportunity – and reason, for organisations to leverage intelligent CLM solutions to drive efficiencies across their business.

Centralising storage and streamlining management

With the average Fortune 1000 company having between 20,000-40,000 active contracts at any point in time, being able to store, access and update contracts in one secure, centralised place is essential to effective CLM.

Enabling stakeholders to easily access contracts from anywhere in the world helps drive numerous efficiencies in everything from version control, and streamlining approval processes to tracking and monitoring contract amendments.

CLM software like Jaggaer Contracts also enables organisations to draft contracts more quickly and importantly, with reduced risk. Utilising templates and common clauses helps to standardise contracts for consistency and compliance across the organisation. AI and machine learning capabilities can also integrate specific clauses based on supplier profiles and specific details included in briefs for new vendors.

With each contract having unique deadlines and hidden risks, having deep visibility across your organisation’s entire contract suite is vital.

Driving efficiencies to focus on value-adding activities

Manually reviewing contracts to fully understand risks and obligations is a demanding and time-intensive task, not to mention one that is prone to human error. Simply hiring more people to take on this role is not a viable solution and instead, organisations should be looking to technology to address these challenges.

CLM software can cut manual labour costs in half by automating repetitive processes like data extraction from large contracts and data sets. Intelligent search functionalities enable teams to find keywords, clauses, and terms across contracts in a matter of seconds, significantly cutting down on manual review and reducing the risk of future noncompliance.

Utilising CLM software frees up time so teams can focus on other value-adding activities like pursuing more strategic agreements and building stronger relationships with clients, therefore contributing to enhancing overall supplier management.

Reducing risk and improving compliance

In the world of contracts, a single word or phrase can leave organisations open to significant financial risks, meaning proper risk mitigation is critical.

Technology like natural language processing (NLP) can support organisations in drafting and reviewing contracts and provide recommended language or clauses to include based on the context of the contract, history of similar contracts and supplier performance. It can also identify deviations from standard templates preapproved by legal departments and provide a percentage score to help keep contracts in check, with the potential to save financial headaches down the line.

In addition, CLM software can also identify specific areas your team may not have considered a risk and provide suggestions on how to draft or update contracts to mitigate these risks for your organisation. With cybersecurity high on every organisation’s agenda, the right CLM software can ensure governance and security measures are being met by controlling which team members can submit contracts or collaborate on negotiations.

Intelligent reporting and analysis

Being able to analyse your contracts to identify best practices and inconsistencies across suppliers is one area where AI and machine learning are really taking contract management to the next level. Jaggaer's acquisition of contract analytics company DocSkiff is enhancing capabilities in this area so that organisations can integrate intelligent contract management into their wider suite of procurement solutions to enhance overall supplier management.

Using AI to analyse contract data can provide valuable insights on supplier performance to help organisations quickly identify which suppliers might be missing targets or aren’t delivering in areas like delivery times, invoicing, and other key metrics outlined in their contracts.

These insights can help inform smarter business decisions such as whether to renew a contract or look at alternate suppliers based on intelligent scenarios proposed by the software. This kind of analysis can drive time savings of up to 50% per contract and help reduce overall risk to the organisation. When integrated into wider procurement solutions like Jaggaer Source to Contract organisations can reap even deeper insights into their supplier management.

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