Digital Contract Management is here to stay.
The need for adopting technology for enabling efficient contract management practices was already existent, and the pandemic has only expedited the same. Gone are the hesitant moves towards digitizing CLM operations. As lockdown caused remote access to centralized CLM software – these are the ways of work-life that we have become familiar with.
Innovative offerings and technological advancements are transforming contract management from a routine process to a critical dimension of the business unlocking immense value creation.
And the CLM landscape has two significant components that are defining its shape and success within an organization. Business leaders know that a healthy blend of human cognitive intelligence combined with technological advancements will be the key to open CLM efficiency that assures business growth.
So, what are the trends under these two categories that organizations should be aware of?
1. On the people side
Organizations are waking up to having a focused team with the right mix of talent to steer the contract management process forward. If the contract is about obtaining a new software product, it no longer suffices to have just the finance and business leaders involved. It must include the representatives of the IT department, vendor management department, and anyone else whose views and continued support are required. It would be worthwhile to bring onboard external vendors to ensure lines of communication are clear.
All stakeholders involved in the contract agreement and who will be impacted by the clauses and commitments must come together. There should be transparent interactions between team members, and any issues related to the contract have to be ironed out. This is to ensure that future disagreements and dislocations are removed. As legal contracts have several reasons to be mired in disagreements and litigation.
2. On the technology side
Organizations that have always been on the cusp of digitizing their legal operations have taken the plunge to adopt CLM software swiftly – owing to the pandemic. Office shutdowns, lockdowns, physical distancing, and employees working from homes have necessitated this. Many organizations that have envisaged this as a temporary fix have realized the enormous benefits of digitizing contractual paperwork and unlocking productivity. They have institutionalized these paperless practices and opened up a remote access facility to employees irrespective of location.
While this may be a trend gaining momentum due to continuous pandemic waves, there is also the need to strategically tackle this shift to remote. It warrants to equip employees with the right software tools to access the central contract data and work independently, making decisions and initiating action.
Any workflow or process that involves manual intervention affects two precious and key dimensions of the organization: Time and Resources. When employees have to own legal contract processes independently, it introduces human error, which is costly and dents the trust quotient. Another significant aspect is that the employees are devoid of opportunities to champion strategic initiatives and invest time in continuous learning. This is because they are fully involved in manual contract creation and related processes, which is time-consuming and tiring.
Automation of legal contracts is a big boon, and it instantly frees up time, removes risks, guarantees compliance and efficiency. Also, when organizations continue growing, the volumes of contractual data mounts, making it practically impossible to manage them. And automation of end-to-end operational procedures of legal contracts is the only way to scale and ensure business growth.
Artificial Intelligence (AI) and Machine Learning (ML):
On the same note of automation, much has been said and written about the role of Artificial Intelligence in easing several contractual processes. However, it is still a trend that is only gaining traction as there is a great deal of trepidation involved in adopting the same. Questions such as will it replace humans still linger.
But experts still hold on to the fact that it has immense possibilities within the contract management purview. And AI-based analytics tools and programs have the potential to reduce a lawyer’s time and effort. However, we are not there yet, and it remains to be seen how AI will take shape in the decade to come and how organizations will infuse the same into their operations.
As a subset of AI, Machine Learning, when used in conjunction with AI, has the scope to optimize management strategies and mitigate risks. And this is while, analyzing, and solving contracting issues before or as they arise. A CLM that incorporates AI will automatically include ML and has the intelligence of evaluating an innumerable number of contracts and legal documents. Both AI and ML play a pivotal role in simplifying the contract management process in the future.
While the trend to move contractual agreements available centrally and online has made working remotely and accessing information quick and efficient, it has also caused other problems to erupt. Lack of data privacy and issues of data breaches and cyber-attacks have come to be. Organizations are integrating data protection as a cornerstone in the digitizing journey. Contract Management software must ensure that robust data privacy aspects to avoid any misappropriation of data. It’s important to go beyond the standard governmental regulations and mandatory compliance procedures to ensure holistic data security procedures. This will go a long way in helping organizations cement the bonds of trust with clients and third parties.
What would be helpful here is to explore and implement data security proven methods such as two-factor authentications and data encryption. Two-factor authentications intelligently combine what you know, what you are, and what you have. For e.g., after your password authentication is completed, you will be asked to enter a code sent to your mobile.
Another data security method is Data encryption which is a security method where the information is encoded and can only be accessed or decrypted by a user who has the correct encryption key. And for anyone else, it appears as a completely unreadable and scrambled block of text.
Another equally concerning factor that needs to be addressed is stringent gateways and other digital identification mechanisms to access data. Given that data today is being accessed from anywhere, it makes incorporating identification and verification crucial in the CLM software.
Contract Management has transformed from being the neglected back-office function to being a competitive advantage leading to business growth. The above trends and several other emerging ones are defining the CLM landscape.