AI Based Contract Analytics A must to mitigate Enterprise Risk


It is a known fact that the success of any organization is solely dependent on the volume of business they do in a fiscal year along with how they were able to effectively manage risks arising from the contracts they have signed with their vendors, customers, partners and employees

To start with, lets understand the various ways an Enterprise can be exposed to potential risks regarding the contracts.

Unable to trace the signed contract on time

Contracts are managed by various stake holders across the organization and several copies are rotated back and forth until the final contract is signed off by both parties. Most organizations who do not have a central repository of contract documents keep these signed contracts in several places that include Emails, Cloud storages like Google Drive, Drop box, file cabinets in case of paper based scanned documents, USB drives and so on. When there is a contract breach or dispute it becomes humanly impossible to go over so many places and sniff through the contracts and get to the right one on time.

Auto Renewal of a Vendor Agreement without notice

Every organization enters into agreements with the vendors from whom they take services. For various reasons most of these vendor agreements have renewal terms in such a way that unless there is a prior written notice within X days of the agreement termination, the agreement that the organization has signed gets auto renewed for another term. This can become a potential risk especially when the organization is not very happy with the services and wanted to terminate but has lost track of the agreement dates resulting in auto renewal of the signed agreement.

Deviations from Standard Terms

Almost all organizations follow standard templates vetted by their legal when signing contracts with vendors and customers. However, in few cases depending on the other party terms organizations do accept reasonable deviations especially in cases like Payment Terms, Penalties and Damages etc. When there are many such contracts which are deviating from their standard templates it becomes unviable to keep track on such contracts and this can cause substantial risk to the organization especially when it comes to Penalties and Damages.

Lack of Visibility on key contract Data

When several different type of contracts are being signed with Vendors, Customers and Partners and when there is no Digital Contract Repository there is no way to have visibility on key contract terms and clauses. Also unless someone manually dives into each of the signed contracts and takes out important contract information there is no way of having visibility and this can be a potential risk to the organization as you would not know which contracts are expiring when, which contracts are coming up for renewal in the next 30-60-90 days and there by organizations lose the opportunity to re-negotiate better terms with the other parties.
While above are some of the potential risks that an Enterprise might go through for not having a proper contract management mechanism in place, it seems that the entire contracts and procurement space is going through an End to End Digital Transformation today with the advent of latest and emerging technologies like Artificial Intelligence, Machine Learning and NLP.

How Artificial Intelligence based Contract Analytics can help mitigate contract risks?

Traditionally in any organization analysing the signed contracts from time to time, assessing the risks and coming up with mitigation measures is the most time-consuming component of the contract management process. This task is entrusted to corporate legal representatives whose main role is to review the contracts clauses, see which are deviating from standards and which are counter productive to the business.

Inspite of deploying the best legal folks on the job there is still a vast scope for Artificial Intelligence to enhance and scale the contract analysis beyond human limitations.

Here is how Artificial intelligence coupled with Machine learning and NLP can do the magic

  • AI can easily understand the different types of contract documents consolidated from multiple repositories and classify them into different types based on contextual understanding
  • NLP coupled with ML models can understand any type of contract documents including scanned images and can extract the key Meta data from the contracts
  • AI is used to compare the extracted contract clauses with the organization standard templates and other similar executed contracts to understand the deviations and flag them for review

The above process when scaled using AI across the contracts within the organization, the risk can be heavily mitigated

We built a platform ( that can take the contractual documents ( MSA, NDA, SOWs, etc.) from different data sources such as Dropbox, Box, S3, and SharePoint; based on what users are interested in extracting, the platform applies the machine learning models to extract and present the key attributes such as start date, end date, SLA’s, termination notice periods and any liabilities and risks associated.

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