AI Contract Review: Enhancing CLM Accuracy and Speed
- September 19, 2024
- 15 min read
- Sirion
Introduction
Legal teams spend substantial amounts of time reviewing contracts, from small agreements to complex multi-party deals. According to a report by a legal technology company, legal professionals spend up to 92 minutes on average reviewing and analyzing a single contract. With the growing volume and complexity of contracts, ensuring that every detail aligns with organizational standards is critical. Errors in contract management can lead to costly disputes, regulatory fines, and reputational damage.
The Challenges of Contract Review
Traditional contract review processes face several significant challenges that impact both efficiency and accuracy:
- Resource-Heavy Manual Processes: The manual review of contracts is highly labor-intensive. Legal teams often struggle with the task of sifting through extensive documents, which can result in delays and costly mistakes during contract negotiations. This method is prone to oversights and inefficiencies that compromise the effectiveness and accuracy of contracts.
- Significant Reliance on Legal Expertise: While some documentation and administrative tasks can be delegated, legal professionals remain crucial for reviewing contracts at an issue level. This heavy involvement increases their workload and requires specialized legal knowledge and a deep understanding of the business context. Without this expertise, key issues may be overlooked, leading to potential risks and unfavorable terms.
- Fragmented View of Organizational Risk: Even when specific issues are identified, it is hard to ascertain whether similar risks exist in other agreements within the organization. This fragmented perspective leaves companies exposed to potential compliance failures and legal challenges due to overlooked risks in other contracts.
- High Costs of Scaling: Scaling review operations to meet increasing business demands or regulatory changes can be expensive, often necessitating additional legal resources. This makes it difficult to manage fluctuations in workload efficiently without incurring significant costs.
- Varied Negotiation Standards: Onboarding larger legal teams can introduce human risks associated with inconsistent language and differing perceptions of the organization’s standards and risk appetite. This overall lack of standardization complicates the negotiation process, making it challenging to ensure uniformity across contracts and potentially increasing the organization’s risk profile.
- Dynamic Regulatory Landscape: The constantly evolving regulatory environment complicates compliance. Without a comprehensive review process that identifies and addresses risks across all documents, organizations may miss critical updates, resulting in incomplete risk management and potential compliance breaches.
AI Contract Review: What Is It and How Can It Help?
AI contract review leverages advanced artificial intelligence to analyze, interpret, and extract information from legal contracts with remarkable speed and precision. By enabling greater automation and standardization in the review process, AI reduces the manual workload for legal teams, enhances risk assessment capabilities, and effectively addresses scalability and cost challenges. Here’s how AI contract review can transform your contract management:
- Interpret Contracts: AI algorithms are designed to decode complex contract language and context, uncovering insights that might be missed during manual reviews. This comprehensive analysis encompasses not just internal documents.
- Automate Risk Detection: AI contract review swiftly uncovers hidden risks and inconsistencies, generating alerts and actionable recommendations for remediation. By referencing the company’s risk position in its playbooks, AI provides a nuanced assessment of potential contract risks.
- Streamline Legal Review: With AI handling the initial analysis, legal teams only need to review AI-suggested redlines. Users can either accept these suggestions or manually address identified issues, supported by associated playbook guidance that facilitates informed decision-making during the manual redlining process.
- Address Issues Organization-Wide: AI identifies critical issues, clauses, and deviations from standards, making it easier to implement necessary changes across the organization’s contracts. This ensures that all contracts align with organizational policies as well as regulatory compliance policies and maintain a consistent standard.
Key Benefits of AI Contract Review
Implementing AI in contract review provides several notable advantages:
- Reduced Administrative Burden: AI significantly decreases manual effort by handling repetitive tasks such as clause identification and compliance checks. This allows legal professionals to focus on more strategic activities rather than being bogged down by detailed manual scrutiny.
- Less Dependence on Legal Teams: AI-powered CLM platforms enable procurement, sales, and finance teams to manage initial contract stages independently, without constant legal oversight. This increased autonomy accelerates the contracting process and reduces bottlenecks.
- Minimized Human Error: AI enhances accuracy by reducing the likelihood of human errors. Automated analysis ensures that contract details are thoroughly checked, mitigating risks associated with oversight.
- Faster Deal Closures: By expediting the review process, AI contract review facilitates quicker deal closures. This agility provides a competitive edge in fast-moving markets where timely contract finalization is crucial.
Considerations for Implementing a CLM Platform with AI Contract Review
To effectively integrate AI into your contract review process, consider the following factors:
- Training and Customization: AI CLM systems need to be trained on your organization’s specific requirements and language. Customizing the platform ensures it aligns with your unique needs and preferences.
- Transparency: Choose a CLM solution that offers transparency and explainability in their conclusions. Understanding how AI arrives at its recommendations is crucial, especially in legal contexts.
- Legal and Ethical Compliance: Ensure that the AI system complies with data privacy laws and addresses ethical considerations related to bias and fairness. This compliance is essential for maintaining trust and integrity.
- Scalability and Cost: Assess whether the AI CLM solution can scale with your organization’s needs. Conduct a cost-benefit analysis to ensure the investment aligns with your organizational goals and delivers value.
Create Resilient Contracts and Mitigate Risks with Sirion’s Advanced AI Contract Review
Sirion offers cutting-edge AI Contract Review and Redlining capabilities that set it apart in modern contract management.
Here’s why Sirion is a standout choice:
- Customizable to Company’s Standards: Sirion is the world’s only AI-native CLM platform, providing advanced automation and precision in contract review and remediation. The platform leverages advanced AI models to perform issue-level reviews rather than just clause-by-clause analysis.
- Transparent View of Risks and Risk Score: Sirion allows you to define a library of risks and company positions. It assesses contracts for hidden risks, categorizes them by type and criticality, and provides concise summaries in natural language enabling them to redline with confidence.
- AI for Efficient and Accurate Issue Detection: Automate issue identification in your contracts by using AI models, trained on contracts to compare terms against preferred terms from your playbook.
Conclusion
AI review revolutionizes contract management by providing scalable, accurate, and efficient tools that automate risk identification and empower non-legal teams to participate in the review process. With Sirion’s AI contract review you can simplify risk visualization through clustering and ensure compliance across all documents, accelerate deal closures, review risks at speed, and enhance overall contract efficiency. For a closer look at how AI can enhance your contract management processes, consider scheduling a demo of the Sirion platform to experience its full capabilities.
Additional Resources
Contract Negotiation
When to Walk Away from a Contract Negotiation: 6 Signs
Contract Clauses