To get some clarity and cross the contract AI chasm, we have partnered with World Commerce & Contracting to conduct the first-ever, comprehensive benchmark study on the benefits, barriers, and usage of AI within contract management. In this part of our series "Crossing the Contract AI Chasm", we dive deep into our second trend: contract automation is a priority in most organizations, but there’s still a lack of understanding of what can be achieved beyond efficiency.
Overall, it was positive to see that primary use cases for contract automation centered around the use of approval workflows, a searchable repository, and integrations with existing business applications. Most organizations said that contract automation is primarily used for low (43%) and medium (33%) complexity agreements. These are the sort of agreements that require little to no negotiation, like NDAs or SOWs.
On the flipside, the tasks that seem are still manual are clause libraries, contract playbooks, collaborative redlining, and risk management since authoring and reviewing high-complexity agreements is a sensitive task. As a result, respondents identified obligations tracking, followed by contract development, review, and approval as the primary points of friction that are most significant at their organization.
Once again, the primary driver for the automation of manual contract management tasks was increased speed and efficiency. However, this indicates that many organizations are still in the infancy stages of contract automation and may not have a clear vision of what can potentially be achieved beyond efficiency gains.
No worries though, the future seems bright! Our research revealed these as the top priorities for contract automation over the next 1-2 years:
- A widely accessible and searchable repository of all signed agreements
- Ability to assemble agreements from an AI-driven clause library
- AI-generated risk scoring and redlining
Risk management starts with a searchable repository.
According to the journal of contract management, 71% of companies aren’t able to find 10% or more of their contracts. When you can’t locate the agreements that memorialize your legal obligations, you open yourself up to significant exposure. You may miss obligations, contract renewals, payment milestones, and more.
There is A significant cost associated with lost or mismanaged contracts.
The WorldCC determined that the average company loses 9% of annual revenue due to mismanaged contracts, and the percentage is even higher (up to 15%) for larger organizations. That revenue is eroded through these common contracting pitfalls and manual tasks, such as slow negotiations and missed milestones.
To read the full benchmark report, click here.