The era of AI in CLMs is upon us. A few years back, CLM solutions were mostly deployed for functions such as central repository or contract templates. However, they now come with powerful capabilities which take care of every step of a contract’s lifecycle—from raising contract creation requests to authoring, negotiation, approval, sign-off, and even post-award analytics. With the latest developments in AI, modern-day CLMs are coming up with futuristic capabilities which have the potential to revolutionize the entire contract management process. This blog series will talk about such AI-driven futuristic CLM capabilities; part-1 focuses on predictive risk profiling.

Predictive risk profiling:

Next generation CLMs come armed with dedicated AI-based algorithms to predict the risk associated with a contract. Risk score is calculated based on a combination of several factors such as—

  • Clauses used in the contract
  • Past performance of similar contracts
  • Historic data of the contracting party
  • Obligations met thus far

Higher the risk score, higher the chances of non-performance. Predictive risk profiling can be performed for contracts before signing them as well as for signed contracts. Knowing the risk involved before finalizing the contract acts as a warning mechanism so that contracts with high risk scores can be reconsidered, clauses altered, and so on. Foreseeing the risk factor for an ongoing contract helps take measures to mitigate the damage caused thus far and prevent non-compliance in the times ahead.

Some CLMs also allow you to assign custom risk scores based on your understanding of the various contractual aspects. This adds a human touch to the otherwise automated process.

The next blog post in this series will talk about another futuristic CLM capability—stay tuned!
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Author Stuti Mehrotra

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