How to Revolutionize the Contract Negotiation Process with AI
Every incoming contract your organization executes poses some degree of risk or uncertainty. Perhaps an agreement’s force majeure clause jeopardizes your supply chain. Or maybe a master services agreement (MSA) you’re being asked to sign contains untenable warranties—or provisions that, in effect, would compromise your data security practices.
There’s no question that agreements need to be carefully reviewed and negotiated. But a tedious manual review process can often drag out, causing a bottleneck between an enterprise’s legal team and its sales or procurement departments. That’s why introducing AI-powered contract analytics to the negotiation process can tighten and streamline the workflow—and help legal teams mitigate risk across contracts.
Understand the need for AI, by the numbers
To recognize the need for revamping the contract negotiation process, let’s quantify just how much time and money manual processes may be costing your enterprise. According to the DocuSign 2019 State of Contract Management Report:
- 65% of polled contract management professionals said they experienced delays in closing deals amid contract negotiations
- 53% said that a contract typically goes through three to four revisions
- 33% of responders said contracts take upwards of 30 hours to negotiate
In addition to these inefficiencies, the contract negotiation process can still leave your enterprise saddled with risk and subject your customers to a suboptimal experience. Forrester Consulting’s 2020 State of Systems Agreement report, conducted on behalf of DocuSign, found:
- 47% of polled contract management professionals said their enterprise experienced unnecessary risk due to the inability to proactively detect problematic language in contracts
- 46% said that delays and inefficiencies in the contract negotiation process resulted in a poor customer experience
AI-powered contract analytics bring valuable intelligence to the entire contract lifecycle. DocuSign Insight, part of the DocuSign Agreement Cloud™, delivers contract analytics to help legal and business teams gain visibility across the entire organization’s portfolio of existing contracts, regardless of where and how they’re currently stored. Insight brings together agreements from a range of sources and formats and analyzes them with a combination of AI technologies.
In addition to enabling full Boolean search across all contract text, Insight’s AI enables agreements to be searched and filtered by legal concept, above and beyond the inherent limitations of keywords. For example, if you’re looking to understand how your supplier relationships may fare during a catastrophic event, you can automatically find and compare all force majeure clauses across your supplier contracts—regardless of whether the specific term “force majeure” actually appears in those clauses.
The same core technology can revolutionize the negotiation process. DocuSign Analyzer takes Insight’s advanced contract analytics and applies them to the pre-execution phase of agreements, to help your legal and business teams negotiate better agreements, far faster than traditional methods can enable.
Analyzer streamlines and expedites negotiations by:
- Automatically extracting clauses and terms of incoming agreements
- Applying logic to build in-depth scorecards, ranking the risk level of extracted terms based on your organizations own legal and business playbook
- Automatically recommending replacement language for risky terms from your organization’s pre-approved clause library
Analyzer’s risk analysis looks at both the existence and absence of terms of interest in the agreement, and is informed by the organization’s own policies. It displays its results on a “red-yellow-green” basis, making the risk level of existing clauses—or the fact that a needed clause is missing from the draft—easy to visualize.
Analyzer is delivered via an add-on to Microsoft Word, making it possible to analyze inherent risk within an agreement, accelerate review of the agreement, and streamline the process of revising the agreement all from one place. Submitting a contract for AI analysis is a matter of a couple of clicks, with the results appearing in seconds or minutes. The risk scorecards are displayed in a sidebar, and the recommended replacement language can be inserted directly into the agreement with a single click. At no point does the contract reviewer need to leave Word to perform all these functions.
What else does AI have to offer?
To learn more about how AI-powered contract analytics can make your contract negotiation process more efficient and effective, watch our webinar “DocuSign Analyzer: Negotiate with the Power of AI.” The session is moderated by World Commerce & Contracting COO and CTO Paul Branch and features legal and AI experts from DocuSign as well as global legal services leader UnitedLex.