Contract discovery or C-discovery, as it is now known, is helping boards get a handle on the legal, compliance and risk management elements of overseeing contracts. Jeff Catanzaro of Huron Legal discusses how new technologies are helping.
Just as e-discovery revolutionised traditional document production methods in the last decade, contract discovery, or c-discovery, is changing the landscape for contract lifecycle management (CLM). Today, c-discovery is transforming the way global CFOs are obtaining insights into their organisation’s contract lifecycle. In the past, business units, which typically operate in silos, have frequently been out of sync with legal, compliance and risk management departments with respect to their existing contractual obligations. In many cases, the organisation only has a repository for contractual agreements, rendering it cumbersome and time-consuming for the legal department to review each contract to advise on management queries.
However, with emerging technologies, disparate corporate units can achieve more synergy by quickly ascertaining what the organisation’s contractual obligations are. The technologies and tools extract metadata to provide information that can be customised for specific businesses and industries. For example, the technology can provide basic or more advanced fields of information, such as the contracting parties, jurisdiction or venue, obligations, costs, expenses, indemnification, limited liability, and so forth. This information is particularly valuable in the post-execution phase of contract lifecycle management, and these new ancillary technologies create efficiencies for the organisation.
The technology is also very useful when negotiating and drafting new contracts. For years, the focus of contract management technology has been on control and compliance, but that is shifting with a view to the value added from data extraction and analysis, using legacy contracts as a source of business intelligence to predict probable outcomes. For example, analysts will be better prepared to project risks associated with performance or payment using the analytics that emerging technology provides. By harnessing the insights of historical data, organisations gain strategic insights to make future business decisions, yielding more profitable results. When implemented correctly, the new technologies provide accurate, consistent, and swift guidance that enables decision-makers to thwart potential problems and plot optimal outcomes.
Another benefit of the emerging technologies is their ease of use as compared to traditional CLM systems. While touting many possibilities and offering many positive attributes, traditional CLM tools have proven expensive to implement, yet they do not deliver the results envisaged by the organisations. Organisations often do not fully leverage many of the functionalities in traditional CLM systems, due to either inadequate training or insufficient engagement and unfamiliarity with the platform. While the traditional technology is capable of delivering data and a wealth of information, industry experts estimate that only 10 percent of business analysts fully utilise the functionality of traditional CLM tools. Moreover, regardless of the user’s training or experience with the tools, the existing technologies tend to operate on a transactional level. Transactional-level analytics do not provide the most beneficial insights into the portfolio of contracts or contract types that would enable a legal department or business unit to quickly make decisions optimising revenue and lowering risk.
Intuitive and friendly
In contrast, the ancillary technologies now available on the market simplify the contracting process by filtering strategic information in a more intuitive, user-friendly manner. The emerging technologies quickly empower business analysts with data that they can readily understand and manage, enabling a better grasp of the consequences of the terms and relationship models of the contracting process. As a result, analysts can deal with complex demands by offering a simplified and accessible contract, which is beneficial not only when negotiating and originating contracts but also when managing the contractual obligations post-execution.
The new technologies also allow for more efficient contract drafting as well. An oft-heard complaint of business units is that legal departments are too slow in drafting contracts (impeding commerce). Business development professionals and others involved in dealmaking worry that delays in the execution process could jeopardise a deal. To address these concerns, the contract lifecycle management field has seen significant movement over the past 18 months towards technology to deliver automation and origination of contracts. Using the emerging technological tools, organisations are experiencing enhanced synergies between the legal and procurement departments and the business units, speeding up the contract process. This technology can be embedded or added as a “bolt-on” to traditional CLM platforms. The automation facilitated by the technology should not replace the expertise of legal department; rather, organisations should use this technology to accelerate the contracting process. Legal departments as well as compliance and risk management should be consulted when selecting the technological tools to determine how to best utilise them for the organisation’s specific needs and goals.
Each organisation will manage contracts differently, depending on whether it focuses more on the buy side or the sell side, but the emerging technologies can provide remarkable insights to assist either kind of company. It is a growing area, and software and technology companies have developed powerful tools to extract metadata of contracts using analytics and accelerators for contract origination that will prove valuable to many organisations. Corporate legal leaders should become informed about these developments and determine how best to implement these technologies to best serve their organisation’s business needs.
Jeff Catanzaro is Managing Director at Huron Legal, Jeff has more than eight years of experience in providing legal process outsourcing solutions to corporations and law firms firms relating to litigation, corporate transactions, contract management, and due diligence. He also has business development, supply chain management and experience building LPO centres in Asia and India.