AI and the Contract Management Lifecycle
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Introduction
It is a really great time to be a contract manager in the age of Artificial Intelligence (AI). You can look forward to a time when the fragmented, cumbersome tasks that are required to manage the contract lifecycle are gone.
Instead, contract managers will be enabled by a streamlined, data-driven powerhouse of efficiency and innovation. By embracing the power of AI and great contract management skillsets, organizations can unlock unprecedented value, enhance compliance, and see contract managers elevated to strategic business partners. This new era of contract management can reduce risks and improve decision-making while also fostering stronger client relationships. With AI handling routine tasks, the contract manager of the future can focus on high-value activities, ultimately leading to better business outcomes and a more agile and responsive contract management function.
The paper released by WorldCC in December 2024 provides an insight into the strategic business value presented by the use of AI in the contract lifecycle. It explains how it shifts business capability from transactions and compliance to an environment that is disciplined, yet dynamic. An environment that is rich in data and the intelligence to align the creation and management of contracts to business objectives. AI holds out the promise of lower costs and increased revenue – the opportunity to tackle the 8.6% average value erosion that has invisibly eaten away at financial performance.
We believe – and are starting to see – that the investments made in the contract management practice are about to be realized. AI will be able to handle the bulk of the enablement work essential for contract managers to work their magic.
This will free up the contract manager to spend more time doing what humans are best suited to do. In this paper we will bring this to life.
Only 8% of organizations have made investments in building integrated contract management capabilities... and it is into this environment that we are now introducing AI.
Two related reports about AI. This AI and the CML, outlines a compelling vision for the future and AI's impact on contract management's role and value. Our other report in the series, AI: a strategic revolution in contracting report explores how Agentic AI is transforming contract management's execution and perception.
AI and the Contract Management Lifecycle
Call to Action: Making AI Work for Your Contracting Process
Moving beyond these areas (on the previous page) of streamlining current operations, better decision-making, and improved overall business performance, AI introduces several capabilities in contract management that were previously impractical or impossible at scale, including:
Large-scale analytics, risk and opportunity management
- AI can analyze vast quantities of contracts in a fraction of the time it would take humans to identify patterns, common issues, and opportunities across thousands of documents. This includes identifying interdependencies and inconsistencies and undertaking impact analysis, such as a disruption to supply or a premature termination.
- By aggregating data from numerous contracts, AI can provide benchmarks and identify best practices, helping sellers optimize their contract terms and strategies.
- AI can support scenario assessment or planning, for example, how risks, opportunities or performance issues in one contract might affect other contracts, allowing sellers to proactively manage the affected relationships and impact. Similarly, in the context of risk identification, it will become far easier with AI to gather real-time information regarding risks such as supply or delivery concentration.
Dynamic compliance monitoring
- AI can automatically update contract templates or potentially issue change notices to reflect new regulatory requirements, ensuring ongoing compliance and reducing the need for manual intervention beyond perhaps initiating the action or validating the work of the AI.
- AI will link across multiple systems containing contract-related data to provide a single source of truth of the contractual landscape.
Enhanced customization and personalization
- Personalization can now be done at scale. AI can generate contracts and other commercial materials based on individual client needs, preferences and context, increasing relevance and fostering stronger relationships.
- AI can enhance emotional intelligence capabilities, mitigating human insensitivity to emotions. This can be especially helpful in negotiations, where it may suggest strategies related to the known behaviors of a counter-party, or where voice or text recognition tools can generate alerts to the mood or emotional state of a counter-party. AI can assist in adapting negotiation options in real-time based on the counter-party’s behavior and responses, optimizing outcomes dynamically.
Predictive insights
- AI may predict contract performance based on historical data, helping sellers identify potential issues before they arise.
- AI may analyze client behavior patterns to predict future actions, scanning performance on similar engagements elsewhere to provide insight. For example, delayed agreement of milestones in one phase might signal a greater-than-expected impact on a separate later phase. Concerns may be addressed proactively, and client satisfaction may be improved.
Automated Contract Lifecycle Management
- AI supports automation of the contract lifecycle, from inception of requirements to execution and renewal, reducing manual intervention and errors allowing humans to engage in areas of value-add and commercial influencing.
- Reducing friction points in the lifecycle by timely prompts on contract expiry/renewal.
- AI has a significant impact on contract mobilization activities such as targeted awareness, rapid governance stand-up and extraction of and insight into the most material early deliverables on both sides. This can lead to reduced friction in the early weeks post-signature, giving the opportunity to address issues early.
- AI will provide insights into the way the contract commercially operates. For example, it will provide real-time alerts on volume threshold consumption or achievement (or otherwise) of transaction targets, allowing any consequential mechanisms to be applied seamlessly rather than waiting for periodic reports.
Integration with other systems
- AI can integrate contract management with other business systems, e.g., enterprise resource planning (ERP) and customer relationship management (CRM), providing a holistic view of business operations and improving decision-making. Similarly, this contract data provides opportunities to automate downstream activities in other functions, e.g., routine finance tasks that rely on data from contracts.
- AI can gather information and automatically enrich contract data with external data sources (e.g., market trends, financial data), providing deeper insights and more informed decisions.
Predictive insights
- AI can generate advanced, customizable reports that provide deeper and more timely insights into contract performance, risk exposure, and compliance status. The AI system doesn’t just track performance but can also generate actionable recommendations. For instance, it can suggest renegotiating specific contract terms if it detects patterns where the current terms are leading to frequent service level agreement (SLA) breaches or unnecessary costs.
- AI-powered dashboards can offer interactive visualizations of contract data, making it easier for decision-makers to explore and understand complex information.
Written by
Tim Cummins
An international, cross-industry career that has moved from corporate management to extensive research, advisory and capability development services to public, private and third sector organisations. Tim has lived and worked in the UK, France (3 years), and the United States (20 years), building an impressive research and entrepreneurial record with a demonstrated commitment to delivering social benefit. As Founder and President of World Commerce & Contracting (formerly International Association for Contract & Commercial Management), Tim has built a 72,000-member worldwide non-profit association which increasingly influences commercial policies and contracting practices in major corporations and governments. In September 2019, he was presented with the Financial Times ‘Market Shaper of the Year Award. Tim was, until recently, Professor and Chair of International Commercial & Contract Management at the University of Leeds, School of Law, where he taught and led the development of inter-disciplinary commercial programs. Prior to founding World Commerce & Contracting, Tim was on the Chairman’s staff at IBM Corporation and led the development of worldwide commercial processes and skills. His early career included management roles in the banking, automotive and aerospace industries, where he led negotiations up to $1.5 billion in value. He has served in advisory roles for government departments in various countries, including the US, UK, Australia, Canada, and Japan.
Ned Coleman
Donna Young
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