Upgrade Contract Negotiation with AI Risk Analysis
Incoming contracts can cause a lot of headaches. Even heavily-edited contracts that were originally generated in house can cause problems. Traditional agreement analysis wastes a lot of procurement and legal resources, slowing those teams down and driving costs up. When an agreement originates on third-party paper, every clause needs to be manually reviewed to determine responsibilities and risks for all stakeholders.
There are a range of negative results related to these inefficient agreement workflows. According to a commissioned study by Forrester, 47% of businesses experience risk from an inability to proactively detect problematic contract language. In the 2019 State of Contract Management report, 33% of organizations reported taking 30+ hours to negotiate contracts. Much of this time is spent laboriously finding incoming terms, identifying the risks these terms pose, comparing them to preapproved standard clauses and getting the necessary internal approvals for these changes.
For procurement teams, it’s imperative to maintain consistency across a contract portfolio. Since these functions regularly work across multiple external parties and internal lines of business, it’s imperative to find a way to create uniformity among agreements. With a high degree of variance in the library of procurement contracts, obligations can be misunderstood, tracked incorrectly or improperly executed. In the worst cases, they can even run the risk of compliance failures and the corresponding penalties.
The legal risks go even further. These incoming contracts might contain language that puts an organization at high risk or even stop progress on a deal. The only way to determine how much revision work is necessary is to read through the entire agreement, which is already a heavy lift. Without clarity on the amount of work that needs to be done, legal review can create bottlenecks for other teams and delay important negotiations.
Streamline agreement analysis with AI
DocuSign Analyzer is the next step for existing DocuSign Insight customers. It builds on the existing smart technology to create the most modern way to solve problems related to reviewing incoming or heavily-edited contracts. Analyzer is the smartest way to ingest agreements, utilizing the power of AI to quickly break down long contracts and analyze existing or missing language for potential risk. Depending on the specific concepts that an organization chooses, Analyzer reviews contract language according to those concepts and sorts the agreement sections into an interactive table of clauses, with each sorted into one of three tiers of risk: low, medium and high. This step saves hours of manual review time and helps an organization make strategic decisions about how to focus revision efforts. Even better, Analyzer seamlessly integrates with both Microsoft Word and CLM, allowing improved risk review without leaving the tools your team already uses every day.
After Analyzer has reviewed a document, breaking it into smaller sections with their own risk assessments, individual clauses can be compared to standard contract language. To make the review process go even faster, Analyzer will even suggest new language based on a preapproved library of clauses. Suggested edits to risky language is often as easy as a few clicks and can be completed very quickly, without needing additional approvals. Not only does it improve the speed of revision, but it improves uniformity of all contracts that originate with external parties. If those contracts need to be searched later, either by the procurement or legal team, that uniform language will be incredibly helpful.
Analyzer can be especially useful in the case of reviewing contracts after new regulatory changes. When new laws change the business landscape, it’s important to look at the existing contract library through the lens of new standards. To learn more about how this functionality can help with GDPR, CCPA and other new customer data regulations, watch the free Managing Vendors’ Data Privacy Compliance webinar.
Uplevel capabilities of junior legal resources
One of the biggest benefits Analyzer offers a team is the enhancement of junior legal team members. Traditionally, these employees would have to painstakingly review every word of an incoming contract, comparing it to standard language that has been approved by more senior members of the team. Using Analyzer, that work can be done by AI tools. By utilizing Analyzer, junior team members can start their contract analysis projects with that language comparison already done.
Instead, these junior resources can dive directly into revision work, starting with the clauses that have been identified as the highest risk areas of the agreement. Analyzer not only identifies this risky language (either existing copy or missing copy), it also makes a suggestion about the correct language, pulling from a library of preapproved clauses. That means junior legal employees can receive on-the-job training and don’t need to worry about getting any new language approved during the review process.
The new workflow streamlines the initial review of incoming contracts, removing hours of unnecessary manual work and getting the edited version of the contract ready for final approval much faster. Analyzer is a modern way to more advanced work to be handled by these junior resources, reducing the cost of review and avoiding the bottleneck of overburdened senior team members.
Triage incoming contracts to allocate legal resources
With Analyzer’s tier-based risk scoring system, incoming contracts can easily be assessed by procurement and legal teams to determine how much revision work needs to be done. Depending on the specific concepts that Analyzer is checking for, the wording of the incoming agreement is broken down and assessed for risk. The result is a specific number of high-, medium and low-risk phrases, each with an explanation of the revision that needs to be made to reduce risk.
The risk analysis scorecard is a great tool to help any review team manage not only understand which parts of a contract need the most attention, it can also be used more broadly to understand which contracts need the most attention. With an overall view of which agreements have the most incidents of high-level risk, legal teams can make better decisions about which projects to prioritize and can enable more self-service opportunities for the business. Simple tier-based analysis can help organizations better allocate their resources (e.g. whether to consult legal resources on high-risk contract negotiations vs. medium-risk matters workflows) and more effectively plan out the future workload. This faster process works for procurement professionals too because it keeps external negotiations moving quickly, providing an excellent experience for third parties.
Analyzer can be even more powerful when integrated with the broader DocuSign suite of tools. For example, by using an integration to DocuSign CLM, routing can be automated based on the content and risk level, which will speed up the review process even more.
With Analyzer, any organization can streamline the contact ingestion process to get business done faster, reduce risk, enhance compliance and improve the negotiation experience. To find additional resources about the product and contact an expert about how your team can analyze incoming agreements better, visit the DocuSign Analyzer page.