The Value of Trend Identification in Contract Analysis
Throughout the year, businesses conduct thorough reviews of processes and operations to understand the areas for improvement. The same should be done with contracts. Contract analysis is a process that examines, tracks, and organizes information within your enterprise contract repository for insights. It helps you identify, manage and reduce risk.
Customer Trends
The process of contract analysis varies from organization to organization, but it should be an ongoing aspect of contract management. Through this, companies can break down voluminous and complex information into smaller parts to better understand their contracts and drive better decision-making. Moreover, it enables them to extract and evaluate extracted responsibilities, service levels, and other vital data like milestones, deliverables, and KPIs until completion or closure so they can be sure that intended business outcomes are delivered. It, in turn, will empower them with an advantage during future contract negotiations and help them craft more brilliant contracts with embedded risk controls. Contract analysis can also help identify growth opportunities. For example, when the COVID-19 pandemic began, many businesses had to scour their contract portfolio for force majeure provisions related to business continuity. Those with robust contract analysis capabilities could identify the relevant clauses and take immediate action.
Industry Trends
Contract analysis is a vital step in your overall contract management process. It helps businesses extract value from their contracts by identifying and understanding business trends and opportunities. One of the most common causes of revenue leakage is poor-quality contracts. By leveraging contract analytics, companies can identify the source of those issues and rectify them for future agreements.
In the past, running a manual contract analysis would take weeks to complete. When a busy associate general counsel or contract manager got around to it, the executive asking for the report had moved on to other projects. Today, CLM systems automate the process and make it easier for businesses to access this vital information in real time. The result is greater visibility and more accurate analytical insights. It helps organizations mitigate risk, boost productivity and drive more strategic decisions. It also ensures compliance and improves existing client relationships.
Product Trends
Contract analysis is a necessary process that helps companies break down voluminous, detailed information into meaningful, actionable data. It allows businesses to understand their contracts better, improve customer and partner relationships, drive better decision-making, and lower risk. While a contract review examines the impact and implications of a contract, contract analysis goes a step further to interpret how each contract is being executed. It is a great way to spot inefficiencies in the contracting process, such as redlines or negotiation points that may create risk.
Legal professionals typically conduct contract analytics, but it can also provide valuable business insights to other teams who work with contracts. For example, a chief financial officer who needs to understand how contracts will affect budgets and forecasting, or a property manager who wants to ensure they adhere to lease agreements with tenants. Using technology to conduct contract analysis makes the process much faster and easier.
Technology Trends
Contracts form the backbone of any business relationship and transaction. They also set up the frameworks, regulations, and other crucial aspects that define daily activities. Nevertheless, many contracts that have been signed and stowed away never see the light of day again. Contract analysis is a process that is used throughout the contract lifecycle to examine and track information within agreements. It could include any number of things, including contractual risk, contract status, changes in corporate policies, or even a comparison to previous versions of contracts. This data allows teams to identify mistakes and improve the contract process. It translates into faster and more accurate contract processing times and lower operational costs, thanks to reduced revenue leakage. It also helps companies understand what worked in past agreements and empowers them to create more brilliant contracts with embedded risk controls. The technology for contract analysis is evolving rapidly, with new tools and next-gen AI enabling organizations to extract and analyze this data much faster than ever before.
