Contract Lifecycle Management (CLM) is more than just one of this year’s hottest buzzwords. It’s a paradigm shift that is taking place across corporate legal departments at a rapid clip due to desired efficiency in manpower and profitability. Contracts form the basis for all commerce, representing risk as well as opportunity. Companies that use the right technology—particularly Artificial Intelligence (AI) systems—will have a significant advantage over their competitors, moving deals faster and more effectively through their sales pipeline. But when it comes to leveraging AI in the legal sector, where should a company begin?
What follows is a closer look at the various ways AI is used in the legal sector, the pros and cons of CLM software, and which stage of the contract lifecycle you should focus on first to gain quick ROI and make the case for digital transformation within your organization.
The Impact of AI in the Legal Sector
AI is applied in a number of ways to help legal teams modernize their workflows, including:
- Smart contract authoring to identify and arrange clauses from the contract library into a template, identify approval patterns, and edit documents
- Clause extraction to store and locate information efficiently, standardize best practices, and help lawyers build a case for suggested changes
- Risk mitigation to indicate which passages contain ambiguous language, deviations, or sub-optimal terms that may end up costing the company money or legal hassle
- KPI tracking to generate reports on key performance metrics, service level assurances, and milestones to improve visibility, quality control, and customer relationships
- Optimize deal timelines to accelerate deals from several weeks to 3-4 days by seamlessly providing side-by-side comparisons, highlighted changes, and version control to aid multi-party revisions
The question isn’t so much if you should incorporate AI in your legal department, but how.
Leveraging AI with CLM Software
A contract Lifecycle management system excels in its ability to assess post-execution data and help teams track the performance of their contracts. Another advantage is the ability to see the process from one end to another, identifying bottlenecks and strategic insights along the way.
But what many businesses don’t realize is that CLM software comes with a long, steep learning curve:
- It has to be integrated into various other systems to track contracts from drafting through final signatures.
- Extensive training and retraining are required for employees to understand how to incorporate software functionality into their daily workflows, and then to learn how to glean specific insights from the data captured by the system.
- Testing is required to finetune the system to meet organizational needs and business goals.
While the global market for CLM software is projected to continue growing from $1.5 billion in 2020 to $3.84 billion by 2026—and that is where legal departments are ultimately headed—the reality is that “all-in-one” CLM systems rarely perform in all areas effectively.
Consider the contract review and negotiation phase for example. Once a contract has been drafted, a junior-level lawyer typically combs through it to ensure it complies with the company’s playbook. Then, senior-level lawyers and third parties conduct a final review. Artificial intelligence and automation can be leveraged to redline contract drafts based, color-code potential risks, and add contextual suggestions, allowing the review process to be complete in a matter of minutes.
AI can help alleviate your contract burdens sooner rather than later.
How LexCheck Utilizes AI in the Legal Sector to Increase Sales Velocity
LexCheck is an industry-leading platform that focuses on the pre-execution redlining, reviewing, and negotiating phases of contract management, which are the stages that typically absorb the most amount of time. Unlike the lengthy setup of CLM systems, LexCheck can be up and running in a matter of days to help businesses grow sales faster. Here’s how it works:
- LexCheck requires far fewer test examples to get started (unlike other AI review software). After only a dozen contract samples are fed to the system, for example, our AI algorithm creates a Digital Playbook and takes the first pass on a contract—reviewing it for clause omissions and deviations from company standards.
- Going one step further, LexCheck can also provide color-coded risk analysis and make revisions based on proprietary best practices, stated preferences, and past experiences.
- Through breakthrough machine learning capabilities and customization options, the system enforces company standards consistently and efficiently.
LexCheck can be used while your CLM software is still being put in place, thus providing a quick way to begin improving sales velocity. It also provides more robust functionality and support in the pre-execution phase of your contracts’ lifecycle. Whether you’re working in a large department that’s dealing with a substantial end-of-year backlog or tasked with handling contracts for a smaller company, it’s in your best interest to move contracts quickly as time kills all deals.
LexCheck’s AI addresses a number of common pain points by:
- Improving workflows, clearing out backlogs, and reducing the volume of contracts stuck in review, languishing in inboxes, or held up in negotiations and renegotiations
- Mitigating confusion, uncertainty, and the number of back-and-forth communications between parties by providing contextual basis for recommended changes
- Focusing lawyers’ time and effort on the clauses that present the biggest potential risks or opportunities for the company
- Completing reviews in five minutes’ time (not days or weeks), thereby improving sales velocity and accelerating profitability
You can upload a contract draft by sending it to our system as an email. The finished draft is then returned to you in a matter of minutes, at which point staff can simply click to approve suggested edits or continue working on the contract.