Digitization of contract data for legal analysis
Legal teams have always had the tedious task of analyzing legal documents, which is not only time-consuming, but also requires great attention to detail and years of training. In addition, the critical data hidden in the contracts has been lost as this is traditionally done manually.
While manual analysis of contracts may have worked in the past, in today’s fast-paced reality it just won’t be enough. It’s time for legal teams to join the digital transformation. In the past decade and a half, every other facet of business has been digitized … except contracts. And with investments in the digital transformation, which is expected overall $ 7.8 trillion from 2020 to 2024, it’s your turn to step aboard.
Businesses rely on contracts to survive. Think of sales contracts, employment and partnership agreements, NDAs, license agreements and more. But as they exist today, contracts are a hindrance to workflow and the data they contain is not being fully used.
Data is currently trapped in contracts
Contracts hide all types of information-rich operational data that are crucial for the success of a company. As much as 90% of corporate spending and investment are determined by the terms of the contract. At the same time, suboptimal terms and inefficient contract management can turn into a full 9% loss of annual sales. While the specific information businesses focus on varies, some common points are hidden in contracts:
Total Contract Value – the total value of the contract after it is activated, its recurring revenues and fees.
Auto-Renewal Opt-out Notification Period – the length of time that auto-renewal can be turned off.
Exchange of personally identifiable information (PII) – data that identifies an individual.
Address region of the other party – the party at the other end of the contract.
Ability to terminate for convenience – the power to terminate a contract if it becomes unsatisfactory.
Exclusivity – a type of agreement in which one party agrees to work exclusively with the other.
This critical data is not readily available and there is no good way to track it unless we adopt a new approach. Once discovered, contracts help companies become more efficient, effective and accurate.
Contract data enables legal teams to operationalize and reduce risks
Legal departments have to keep up in a world with ever larger numbers and more complex scenarios. To do this, they must be equipped with resources that enable data-driven use. Today, for example, legal departments may lack answers to simple questions about the contract pipeline simply because those insights are not stored, compiled, and updated in real time. Without this, legal teams will not be able to operationalize their processes, making it impossible to put in place the systems that will enable them to work more efficiently. At long last, inefficient contracts can cause losses of between five and 40% the deal value. It also puts the company at risk as contracts without tracking are risky.
Contracts contain the operational and substantive information legal teams need to operationalize, set goals, minimize risk, and demonstrate their value to the business. The operating data includes the number of started and completed workflows as well as the processing and reaction times. Material data, such as applicable tax law, contract amount, data protection and implementation obligations, involve risks and obligations.
With the right tools and a centralized system, legal teams have access to all the details they need to prove their team’s worth, work more efficiently, and protect their business.
A new standard: digital contracting
A new standard for companies and legal departments to keep up with a fast-paced, data-driven world: digital contracting, a standardized system for business contracting to connect people to systems and data. Once digitized, contracts become living, collaborative documents that make it easy for you to find and track the once-hidden gold mine of data inside. The result is resilient teams.
Legal Tech is leading the way in developing the software needed to support digital contract design. Next generation contract management software makes metadata searchable and easily accessible. This enables entire companies to have the information they need to make informed decisions.
Soon the days of in-house lawyers on scavenger hunts will be over. Instead, lawyers can instantly create agreements, collaborate, and seek approvals while having access to the version history and metadata needed to operationalize and mitigate risk.
It’s time legal teams got the tools they need to thrive in today’s fast-paced work environment by adopting a better, faster, and more sustainable way of working through digital contracting.
Â© 2021 Ironclad, Inc. All rights reserved.National Law Review, Volume XI, Number 292