Why should an organization invest in a contract intelligence and management platform that leverages customizable models and conversational, generative artificial intelligence (AI)? Why not just adopt any of the off-the-shelf CLM solutions that use static, non-customizable AI models? 

One big reason: The critical visibility into your contract corpus enabled by a customizable contract AI solution that has conversational, chatbot-style ease of use. 

This is a big  step up from contract lifecycle management (CLM) tools using lesser forms of AI.  It’s comparable to the leap companies saw from implementing basic contract automation instead of high-touch, manual processes.  

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The risks of invisibility

First, let’s look at the risks and costs that can arise from having poor visibility into an organization’s body of contracts. 

Missed deadlines and auto-renewals

It's all too easy to miss crucial contract deadlines without proper visibility, resulting in unintended renewals or lapses that cause financial losses. Additionally, missed opportunities to renegotiate terms may occur.

Inability to track key terms and obligations

Poor visibility often leads to difficulties tracking essential contract details throughout the contract lifecycle, such as delivery dates, fees, payments, and expiration/renewal terms, making it more challenging to manage risk and ensure compliance.

Operational inefficiencies

A visibility deficiency can also cause inefficiencies in managing contracts, driving up costs and delays and negatively impacting operations.

Compliance issues

When contract data is difficult to access, decision-making becomes challenging. This may lead to compliance problems – and to further issues as a business struggles to demonstrate its processes and controls in the event of an audit.

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Getting quick and precise answers to contract questions

A generative AI solution can turn user questions into custom AI models that reveal everything those users want to surface across all their agreements, whether that means compliance terms, cost-cutting opportunities, revenue optimization, obligations, risks or more.

Here are just six examples of the questions our own users have posed to our platform:

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Q: Are our vendors compliant with our corporate policies?

It’s crucial to have vendors and suppliers aligned with your organization’s policies. Legal, ethical and sustainability principles are often part of your business values, and vendors who adhere to them reduce compliance risk. 

Contract language should stipulate your vendors and suppliers comply with your standards and values. Yet most organizations find it difficult to track terms in vendor agreements at scale. Identifying whether that compliance language already exists (and where it needs to be inserted) demands a degree of visibility that isn’t readily feasible using manual review or lower-tier CLM solutions. 

Case in point: See how Microsoft uses customizable contract AI to track provisions related to indemnification, data processing obligations, and IP protection.

Q: Do any contracts involve assets from blocked countries?

During periods when international prohibitions are in place resulting from conflict, politics or other factors, an organization is at risk of legal or regulatory action, fines or reputational damage if it violates those prohibitions. Even if it’s doing so unwittingly.

The Russo-Ukrainian conflict is an obvious example, as governments have imposed stringent export controls on products and resources needed by the Russian military, as well as on financial accounts and transactions. If a contract buried deep in an obscure corner of an organization’s operations violates controls like these, the financial penalties can be enormous.

The visibility into your entire contract repository that a customizable contract AI delivers can let you rapidly ferret out any such risks, if they exist.  And give you peace of mind if you find you’re in compliance.

Case in point: Is it possible that fines like this steep penalty for a U.K. firm could have been avoided if they had visibility into their contract corpus? Under U.K. law, a company is liable even for "indirect supply" where the buyer isn't a Russian entity, but the product ends up in Russian hands.

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Q: Which contracts have specific regulatory  compliance language?

Contracts often include language related to industry-specific regulations, legal requirements, and standards. Identifying those clauses helps an organization ensure compliance and minimize the risk of audits or penalties, not to mention that of damage to its credibility and reputation. 

Yet without clear, real-time visibility into your entire collection of contracts, reviewing and updating such language gets expensive in a hurry. Customizable contract AI instantly creates that visibility, making it easier to proactively monitor and adjust contract language over time to stay in tune with regulatory changes and streamline audit preparation.

Case in point: Five Rivers reduced the time it needed to prepare for rigorous contract compliance audits by 85% thanks to the ability to track specific terms relevant to the audits.

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Q: Do any contracts have a non-standard support clause?

This is an example of a search for a specific clause that could be hidden among thousands or tens of thousands of contracts. Locating it could easily devour a huge amount of internal resources, especially if done manually, and outsourcing could be costly.  

Customizable, conversational AI can allow an organization to connect its contract data and allow Legal teams to quickly analyze a huge pool of contracts and find the ones containing such a clause – or any other non-standard agreement terms they specify – in mere hours.

Case in point: Workday avoided the outsourcing costs of a massive data search for a non-standard clause promising foreign-language support within a corpus of 88,000 contracts by using customizable, conversational AI, narrowing the search to two contracts in less than an hour.

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Q: Which contracts allow charging for partial shipments?

When a company faces supply or output bottlenecks, it must assess which customers are willing to accept partial shipments and weigh its options with key suppliers. 

So, it needs to know which agreements contain partial delivery provisions, but that requires a thorough review of numerous contracts, and that can be painfully costly if done manually – and still might overlook agreements containing those provisions. But failing at this could lead to litigation, customer dissatisfaction, and revenue loss. 

Customizable, conversational AI can swiftly identify which contracts allow for partial shipments, avoiding the errors and costs of a lengthy manual review.

‍Case in point: With Evisort’s customizable AI, NetApp quickly narrowed down an unwieldy 24,000 contracts to 600 agreements with provisions that enabled them to mitigate losses in the face of global supply chain disruption.

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Q: Are we compliant with changing data privacy laws?

Answering this question is especially pressing now that data privacy regulations are becoming more common, but vary by country or region – or, in the case of the U.S., even by state. 

Plus, these regulations may mandate companies also be responsible for supplier compliance. For instance, the CPRA and GDPR not only specify that a business must protect consumer data and provide opt-outs, but that it’s liable if one of its vendors or suppliers commits a violation when using that data.

Keeping contracts in step with evolving data privacy laws can be a massive challenge unless an organization can put the right contract AI platform to work identifying potential risks.

Case in point: A Belgian regulator recently found that retroactive data processing agreements are invalid for GDPR compliance. Do you have a clear understanding of your organization's exposure as data privacy laws evolve?

See how it’s done, in depth

In our recent webinar, Stop Reading Contracts: How Generative AI Can Help You Know Everything, we demonstrated how the newest generation of contract AI is changing everything for organizations.

It’s not tall talk or hyperbole, either: The fact that major enterprises like Microsoft, Workday, NetApp and others have come to rely on Evisort’s customizable contract AI for granular insights and remarkable ROI is a powerful proof point.

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For more details, please download a handy guide that covers the topics we’ve touched on in this post.