The data found in a company’s contracts can be converted from complex legal text into actionable intelligence to prevent revenue leakage and enhance the bottom line. Here, Gretchen Bakhshai, SVP, Commercial at Knowable, explains how organizations can use data modeling to derive actionable insights from vast and complex contract documents.
Contracts are the lifeblood of large enterprises. They formalize a company’s commitments and obligations and its ability to capture revenue. They govern every aspect of every commercial relationship across the organization: the rules for buying and selling, the nature of partnerships, details of the supply chain, terms of distribution, the protection of intellectual property, relationships with employees, and much more. In essence, contracts represent the enterprise’s most valuable and powerful dataset. Yet, poor contract management practices cost businesses the equivalent of 9% of revenues each year. For large organizations, that translates into millions, if not billions of dollars.
At first glance, the information contained in contracts may seem largely inaccessible— “locked” within complex legal language intricacies. However, some organizations are now exploring ways to convert legal text into actionable intelligence, just as they might use numerical data to predict expenditures, analyze sales performance or determine the effectiveness of marketing campaigns.
Managing Workflows, but Ignoring the Data
Companies review, negotiate and execute the terms of new contracts, and renegotiate the terms of expiring contracts every day. Not surprisingly, they invest massive amounts of resources in workflows related to the contract lifecycle, from initiation, drafting, and approval to negotiation, compliance, and renewal. As a result, most large enterprises have tens or hundreds of thousands of executed or pending contracts, as well as amendments, statements of work (SOWs), data processing agreements (DPAs), supporting agreements, and more across a myriad of geographies and business units.
Contract lifecycle management (CLM) software systems and other tools leverage automation to help companies increase the efficiency of contract-related workflows, including functions like document management, template creation, review, cycle tracking, and e-signature. But what they don’t do well is to help organizations understand how the volumes of agreements across the entire portfolio influence business governance after the contracts are signed. With visibility into their contract positions – accurate contract intelligence – organizations have the insights they need to manage risk, maximize revenue, minimize cost, and optimize the policies that are working in favor of their growth and operations.