Artificial intelligence (AI) has seen rapid adoption across various sectors in the United States, transforming business operations in profound ways.
According to Forbes, 64% of businesses believe AI will boost overall productivity, underscoring the growing confidence in AI’s potential. In software development, for example, AI-powered tools like natural language processing chatbot ChatGPT have shown promise in API development. However, as we discussed in a previous post, there are still some challenges to overcome.
When using AI to interpret an API, precise descriptions are necessary to define endpoints, parameters, and authentication schemes. The reality, however, is that many internal APIs lack basic documentation or OpenAPI specifications. As a result, while AI-driven tools are almost useful, they often fall short, leading to frustrations rather than enlightenment. While AI adoption in API development presents challenges, other sectors have seen more promising outcomes.
Notably, in the legal field, AI has demonstrated the ability to autonomously negotiate contracts with other AI systems. According to a report by CNBC, AI and machine learning platforms are now capable of processing vast, complex legal data sets, enabling managers to efficiently assign tasks and track the progress of entire legal teams. With these advancements in mind, this article will explore the current state of contract management and how AI will continue to shape contract management, focusing on risk mitigation and predictive analytics.
The current state of contract management
At its core, contract management involves a complex web of negotiations, reviews, approvals, and execution. Traditionally, crafting and renewing contracts has been a time-consuming process, fraught with potential for human error. Today, contract renewal management software is already transforming this landscape. According to research by World Commerce & Contracting, 81% of its member organizations plan to implement contract automation to enhance business outcomes.
One standout example is the contract renewal management software by SOFTRAX, which automates the entire lifecycle of contract renewals. From tracking key dates to generating renewal documents, SOFTRAX reduces the risk of missing critical deadlines that could lead to lost revenue or breached agreements. The software’s detailed analytics and reporting features provide valuable insights into renewal patterns and performance, helping organizations optimize their processes. Moreover, SOFTRAX’s scalability makes it ideal for companies expecting growth, as it can efficiently handle increasing volumes of contracts without sacrificing performance.
AI in contract management
Risk mitigation
As companies increasingly rely on third-party relationships governed by contracts, enterprise risk is on the rise. Forrester Research data cited by LegalDive reveals that nearly half of companies (48%) acknowledge this growing risk. AI contract tools are becoming essential in mitigating these risks by analyzing large volumes of contracts to identify potential issues or changes over time. For instance, AI can flag discrepancies where older agreements may not align with newer standards, a task that would be prohibitively expensive if done manually.
A prime example is Microsoft, which manages about 1.5 million contracts, adding approximately 150,000 new ones annually. To handle this volume, Microsoft has turned to AI-powered vendors like Evisort to assist with contract management. Another critical area for risk management is in agreements related to commercial technology acquisitions. While buying external technology can save capital, it also increases dependence on third-party systems vulnerable to cyberattacks or operational failures. AI helps companies navigate these risks, continuously monitoring and analyzing their contracts for potential vulnerabilities.
Predictive analytics
AI’s potential in contract management extends into predictive analytics, offering transformative benefits, especially when combined with blockchain technology. As highlighted in a Cointelegraph article, AI can enhance smart contracts, providing real-time analysis and predictive insights, which help minimize risks and reduce uncertainty.
For instance, AI-driven analytics can forecast market conditions, assess the reliability of contractual parties, and predict the performance of assets involved in the contract. This synergy between AI and blockchain leads to smarter, more secure contracts that are better aligned with the parties’ objectives, ultimately driving more reliable and efficient transactions.
As AI continues to evolve, its role in contract management will expand, offering organizations smarter, more efficient ways to handle their legal agreements. From mitigating risks to leveraging predictive analytics for better outcomes, AI is set to take contract management software to new heights, driving innovation and enhancing business operations in the process.