Whether you're a nonprofit, small business, or an enterprise, your organization is no doubt founded in large part on contracts. These agreements are legally binding and form the framework of your business transactions. They're also increasingly complex and need more in-depth analysis than ever before. It's enough to overwhelm even the best data analyst teams, which is why they need AI data analysis to streamline their contract management processes.
In this article, we'll examine how AI data analysis can transform the world of contracts. First, we'll define some key terms related to contracts and contract analysis. Then, we'll examine some benefits and applications of AI data analysis for contracts. Finally, we'll list a few AI data analysis tools that organizations can use for their contracts and explain how Terzo can help.
What Is AI Data Analysis in Contracts?
Before you can understand how AI data analysis can benefit your contract lifecycle, you first need a basic understanding of AI. Short for artificial intelligence, AI uses a host of advanced neural networks and algorithms to detect patterns and draw conclusions in a way that mimics human learning. AI for data analysis takes these computational methods a step further and seeks to draw actionable insights from vast amounts of complex datasets to answer important business questions and elevate operations.
Apply that to the contract lifecycle, and AI data analysis amounts to leveraging cutting-edge artificial intelligence data analytics capabilities to improve your contract-related processes. This can include generating, parsing, editing, storing, evaluating for compliance, and more.
Core Mechanisms of AI in Contract Analysis
AI data analysis may use such advanced processes that its application may feel abstract, but the benefits it brings to the table can help any industry. We'll list those specific applications later, but some core mechanisms that power AI analytics are:
Data input: Collecting the actual data
Text preprocessing and normalization: Cleaning and formatting the data to make it usable for analysis
Machine learning (ML): Feeding the tool with the required data to "train" it for analysis
Computer vision (CV) and natural language processing (NLP): How the tool "sees" visual data, such as images, and "understands" linguistic data, such as the clauses found within contracts
Insight generation: Identifying patterns and trends through the analysis
Reporting: Documenting the findings of your analysis in an easily understandable way
Taken together, these mechanisms allow contract analysis teams to collect, organize, and analyze vast amounts of data faster than ever and communicate their findings with clarity that lets executives convert their insights to profit.
Benefits of AI Data Analysis for Contracts
From employing NLP to understanding complex legal terms, AI data analysis tools can elevate virtually every level of your contract management lifecycle. The exact benefits you'll gain will depend on how you use the technology to conduct your AI contract review, but the biggest advantages include greater accuracy, better risk management, improved productivity and more strategic business decisions. Here's how AI data analysis can improve your contract intelligence.
Improved Accuracy and Risk Management
AI allows you to dive deeper into your data. The advanced technologies that power data science and AI can help you identify trends and analyze more complex datasets than you ever could with manual data analysis, so that you can gain greater clarity into the story your data is telling you.
This improved accuracy lets contract teams better manage their risks. For example, ambiguous wording is a challenge for contract risk management, as imprecise language can lead to legal disputes and even regulatory violations. AI contract analysis tools can help by generating templates with clear wording, mitigating the risk of a contract breach down the road.
Increased Efficiency and Productivity
Another benefit of AI data analytics tools is that they can improve your team's productivity by letting you automate repetitive tasks. Many contracts have intricate details and a large number of clauses and metadata that must be carefully scoured for analysis, so the process can be very tedious. Some personnel must negotiate terms and take careful notes, all of which cost valuable time and resources.
Enter AI contract analysis. Contract AI tools use the mechanisms listed above to automatically collect and analyze the data found in your contracts, which drastically shortens the contract management journey. By taking the legwork out of the process, contracts that once took days or weeks to parse out for analysis can now be done in a matter of hours. This not only improves your team's productivity and reduces your overhead, but it also frees up your team to focus their creativity on more value-adding work — which can also boost their engagement.
Enhanced Strategic Decision-Making
Teams that use AI data analysis have a clear picture of their company and customers, which should allow them to make better decisions for their operations. Contract teams can leverage the four types of data analysis to:
Gain meaningful insights about their current contracts (descriptive analytics)
Understand root causes of both profits and pain points in contracts (diagnostic analytics)
Anticipate future trends so that you can better mitigate risk (predictive analytics)
Make more informed decisions based on those insights so that your future contracts will work to your advantage (prescriptive analytics)
Taken together, organizations can take their unstructured datasets and gain a clearer understanding of where they are, where they should be going, and how they should get there. They can then draft contracts that will help them achieve their business goals — and AI data analysis makes it possible.
Real-World Applications of AI in Contract Management
Today's business world runs on contracts, so you don't have to look far to see applications for AI in contract management processes. A few industries whose contract operations have especially benefitted from AI data analysis are:
Legal
Finance
Mergers and acquisitions
Real estate
Healthcare
Military
Nonprofits
Educational organizations
The list is not exhaustive, but the point it makes is simple: Wherever organizations must optimize their contract management lifecycle, AI-powered contract analysis tools are a must.
Join the Future of AI in Contract Management
With all its advanced technologies, the world of AI can feel intimidating. Yet, for all its complexities, one thing is sure: its use has only just begun, and industries of all types will feel its effects.
At Terzo, we leverage AI and data analysis tools to help companies write better contracts. The benefits include greater clarity, higher productivity, and sharper decision-making. If you'd like to see how Terzo can streamline your contract management processes, chat with a representative today and see how we can help.
