Do we need digital contract management? Part 2 of 2
Contract Lifecycle Management (CLM) technology helps companies achieve distributed but agile contract governance, and provides the information required by senior management to make optimal decisions based on complex scenarios. A CLM solution that includes the discovery capabilities mentioned in Part 1 of this blog can make it easier to locate contracts, create a searchable rendition or index, and access an automatically-created abstract containing contractual metadata such as clauses governing law, jurisdiction, indemnity, etc.
So, when using CLM’s discovery capabilities, you, as a user, will generally be expected to fully review a sample batch of contracts to establish a learning set. You would then use this set to start up your contract discovery analytics to serve as the catalyst for system or extraction policies.
Then you would be able to define policy groups, search across their contract corpus, selectively add contractual paragraphs and sections, and define sentence rules to identify and extract metadata from specific contract documents. Your extracted metadata would then flow back to the contract discovery program to enrich the contract abstract.
As the regulatory landscape changes, organizations can very easily adjust and respond to new requirements. Companies that have grown through acquisition or find that they must divest a division or a product can swiftly and dynamically respond to the legal issues raised by such events. This is compelling when “time to results” is critical, because it mitigates risk and accelerates results.
Non-standard clause detection: Your challenges lie ahead
Many organizations use well-defined contract and clause templates during the initial drafting process, but many clauses are accepted with changes, sometimes significant ones. This raises two challenges:
- How can organizations efficiently discover which clauses are frequently negotiated or which ones differ significantly from the approved corporate template?
- How can a legal department know which third-party clauses have been accepted previously so that they can quickly review newly proposed clauses?
To meet both these challenges, your contract management solution with inherent contract discovery analytics should reveal the functionality of non-standard clause detection.
When users only define standard clauses, how will they be able to detect, group clauses, and non-standard clauses for legal review? This dramatically reduces the contract review and approval times for new and renewal contracts, and also enables you to generate a real-life clause library and risk matrices.
Proactive contract template management is essential
Many organizations struggle with the proliferation of contract templates and the lack of control associated with these templates. New contract types, short form contracts, amendments and variations are continually being created. Being able to recognize and classify those items can be a daunting challenge.
But with the right digital contract management in place, business users can define template policies and then apply these to the contract corpus. They can also quickly and easily see those contracts that match the policy, know which templates they matched, and discover how closely they matched them.
Contracts, their embedded data, and associated documents are critical to every part of an organization. To stay competitive, an agile and proactive solution is required — one that enables parties responsible for managing contracts to intuitively and dynamically leverage the full contract repository as required.
Organizations must be agile in the face of business demands, and position themselves to provide answers to complex questions for making informed decisions quickly. Without effective digital contract management, this will not happen.
Part one of this blog looks at some of the common pain points inherent to contracts and the management of them, and explores the question of whether digitalizing contracting processes will solve for them. In many, if not most, cases, as outlined above, the answer is firmly “yes.”
This 2-part article originally appeared in IACCM Contracting Excellence Journal.