Contract management solutions are booming in the US and UK. In Switzerland and the EU, organizations are closely monitoring developments and it seems likely that adoption of new solutions will take off soon. Previously, contracts where seen as an administrative burden for financial institutions. However, they are increasingly viewed as business-critical and with the use of artificial intelligence (AI) on the rise, there are numerous possible applications. What exactly does contract management involve? When can it add value? And what does the future of contract management look like?
In the case of financial institutions, there are business suppliers on the one hand and clients/consumers on the other. Both sides can benefit from a single contract system in which the entire contracting process is recorded and followed.
What is contract management?
Contract management, also known as contract lifecycle management or end-to-end contract management, is essentially a “contract-as-a-service” solution for the smart repository, drafting, negotiation and application of contracts and documents within an organization.
The speed of development of new technologies makes it possible to automate contracts and workflows. A playbook can list the terms and conditions of a contract and provide clear guidance to negotiators. This creates significant efficiencies, including allowing the business to self-serve. Once the automated workflow and playbook are in place, a legal department can focus time and resources on more complex and strategic legal issues. At the same time, the business can focus on operations and benefit from faster delivery of products/services to market without being held up by legal aspects. Through data insights and dashboards, the business can get an up-to-date picture of where the pressure and bottlenecks lie. This gives both management and the Board better understanding of their operations and an increased level of control.
Other advantages are the configurability and user-friendliness of contract management platforms. In short, this means that the platform can be set up and used by someone without IT experience. It also means that the platform can be configured entirely to an organization’s own specification and can be integrated into systems and tools, such as Docusign, Outlook or other CRM products. As a result, the data can always find a way to the end-user.
The added value depends on the current structure and design of the contract (and documents) database, including the volume and complexity of the contracts, as well as the repetitive nature of the work. A quick scan of the current database can provide insight into where the potential benefits lie, including cost savings and process efficiencies.
The compliance benefit of a central repository for all contracts for the purpose of review is not to be underestimated. In the contract-heavy financial services market, it’s vital to have a quick and easy way to search for and identify any irregularities: This is especially true for banks with cross-border business, as laws and regulations change constantly and it can be a challenge to keep tabs on all jurisdictions.
In the long term, it is important to get business and legal functions comfortable with new technology and platforms. While AI is still underused in these platforms, it is expected that several new use cases will be presented in the coming years. For example, (regulatory) mapping applications that help implement new laws and regulations or a language robot that takes over the life cycle of the contract. This future is closer than we think.
Author: Yacine Benyaa