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Systemic Risk is Growing, and Contracts are a Critical Line of Defense

By Hal Marcus, Esq., VP of Product Marketing at Evisort

A recent major software outage disrupted services across various industries, highlighting vulnerabilities within our interconnected digital infrastructure. This incident underscores how quickly risks can compound and escalate in a globalized world. 

As the Harvard Business Review noted, "The interconnectedness of global systems means that a disruption in one area can have ripple effects across industries and geographies. Effective risk management requires a proactive approach and the ability to adapt quickly to changing conditions."

In our latest webinar, “Mitigating Contract Risks with AI-Powered Solutions,” industry leaders Alla Valente, a Sr. Research Analyst at Forrester covering GRC, Third-Party, and Supply Chain Risk, and Tom Orrison, Sr. Director of Legal Operations at Microsoft discussed strategies for managing risk effectively through advanced contract intelligence. This event explored how AI-driven solutions can transform contract management practices.

The Nature of Systemic Risk

Systemic risk is multifaceted and interconnected. As Alla explained, “Risk is usually not a singular type of event; it’s a multitude of factors.” The rapid pace of innovation, coupled with the interconnectedness of global systems, exacerbates these risks. In our webinar, Alla highlighted

how reliance on third-party vendors and the increasing prevalence of cybersecurity threats are significant contributors to systemic risk.

Increasing Class Actions and Third-Party Risks

Alla called further attention to the rise in class action lawsuits, driven in part by regulatory gaps and cybersecurity breaches. The recent global software outage affecting various industries underscores the vulnerabilities within interconnected systems. Tom emphasized the importance of having a proactive “line of sight” into contract terms to manage third-party risks effectively.

Contracts as a Line of Defense

Contracts are not just legal documents; they are strategic tools for managing risk. They contain critical terms that help provide resilience and adaptability to changing conditions. During the webinar, Alla referred to a well-constructed contract as a “secret weapon” in managing third-party risk. By integrating risk management, business continuity, and privacy management into contracts, organizations can safeguard their interests and ensure compliance with evolving regulations.

The Role of Contract AI in Risk Management

Evisort's secure, AI-native contract intelligence platform offers deep visibility to manage compliance, inform strategic decision-making, and contain financial risks. Trusted by Microsoft and other premier corporations to analyze and manage their contracts, Evisort provides:

  1. Automated Compliance: Evisort’s easily-customizable AI ensures ongoing compliance not only with data privacy and security regulations, but also KYC, AML, and other industry-specific regulatory requirements by automatically extracting and auditing relevant contract terms​​.
  2. Enhanced Decision-Making: By centralizing contract data, Evisort enables businesses to make informed decisions regarding M&A due diligence, vendor management, customer onboarding, and adaptation to new regulations​​.
  3. Financial Risk Containment: Evisort surfaces critical contract terms that expose financial vulnerabilities — such as indemnification, warranties, penalties, and more — and can even summarize terms and rate risk levels automatically to help businesses manage financial exposure more effectively.

According to a recent Legal Dive article by Justin Bachman covering the webinar, "The ability to quickly adapt to changing regulatory landscapes and extract actionable insights from contract data is becoming a differentiator for successful businesses."

Conclusion

In an environment where systemic risk is ever-present, leveraging contract AI in your risk management strategies is crucial. Evisort’s solutions provide the tools needed to gain comprehensive insights into contractual risks and take proactive measures to address them.

We encourage you to watch the full webinar featuring Alla Valente and Tom Orrison to gain deeper insights into managing global risk with contract intelligence.

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