Since March of this year, workplaces across the globe have had to resort to some drastic and unprecedented measures pertaining to social distancing, enforcing work from home and brace for an economic slowdown. With hardly any time to prepare, workforces have had to migrate to a remote work model. While this situation may not have resulted in largescale changes for most employees, it likely could have put legal teams of companies under duress. Do legal teams have access to all of your contracts and related material, if they are now working from home (WFH)? Are they ready to react if a supplier declares bankruptcy and defaults on their commitment, or if a client defaults on their payments? Do they know how exactly force majeure clauses will affect current obligations and contract performance?

Simply put, legal and compliance teams must be prepared with answers and solutions to these challenges. And they must at all times have access to, and insights about, legal contracts. Key priorities include service level agreements; liabilities and indemnities; delayed or liquidated damages; and termination provisions and such.

Indiaai’s Sindhuja Balaji speaks to Sarvarth Mishra, CEO of Contractpod.ai, an AI-powered contract management solution provider. Recently, Contractpod.ai released a report titled ‘Contract Management Crisis Preparedness for GCs’ which sheds light on the criticality of contingency planning by legal teams during crises like COVID19, and how AI and Machine Learning could be a saviour. Here are some insights by Sarvarth Mishra on the report and crucial aspects of digitised contract management.

Why should organisations consider adopting cloud-bsed Contract Management Solutions?

Only 17% of offices have gone paperless, with 56% of respondents using paper to sign contracts, orders and booking forms. - IACCM

Cloud-based, end-to-end contract management solutions are not just a fad, but deliver proven results. Organisations should look into acquiring core tools like AI-based contract lifecycle management (CLM) systems, which include contract onboarding, a full contract repository, smart summaries, contract automation, AI analytics, and an integrations ecosystem, as well as revision and review workflows. Such CLM technology can be deployed out of the box – in a matter of two to five weeks – and start you on your digital transformation journey straightaway. And for both mid- and large-sized organizations, it need not cost a fortune. What’s more, these days, it is even more crucial to find the right partner – someone who will assist you with your CLM process and legal digital transformation. They can work out your true needs, ideal objectives, and KPIs, and walk you through your current digital state and all of the necessary outcomes. Most of all, though, they can support you with your contingency planning for COVID-19 – and other crises that may lie ahead

There is no saying when COVID19 will end… but what does this mean for legal departments of organisations?

Let’s face it, the impact is going to be broad-based and affect a multitude of industries – some worse than others. Your legal team needs to be at the ready to deal with the ensuing challenges. As suppliers declare bankruptcy and default on deliveries, and clients default on payments, your team needs to be prepared with the right information. This means having immediate access to all of your files, contracts, and related documents, from anywhere. Gartner surmised it well in their Corporate Legal and Compliance Technology predictions, stating, “businesses increasingly recognize the legal department’s pivotal role in managing risk through digital transformation.” And as such, “application leaders responsible for legal and compliance technology must track the advances in automation, analytics, and AI that are poised to address this gap.” Indeed, these gaps are the ones that separate legal teams that flourish or those that languish during trying times. When it comes to unforeseen circumstances, and unpredictable situations or crises, the senior leadership team (SLT) will want analyses. These provide a picture of the company’s contractual obligations and rights. They also help the organization learn from this experience, and to better prepare for and prevent exposure in future circumstances. The SLT may want to know the financial impact of various scenarios, or the penalty clauses and the number of contracts in which these terms exist. But question is - is your team ready to deliver, despite an office shutdown?

ContractPodAi recently published research on corporate legal practices. Tell us a bit about the findings

Specifically, 62% of respondents are still using manual methods and processes to manage their contracts. Despite having 20,000 to 40,000 - or more - active contracts at any given moment, most large- and enterprise-sized organizations are dependent on an Excel spreadsheet to manage it all. Even more surprising is that many of these companies remain complacent. In fact, more than 48% of companies have not evaluated or considered a CLM option in over four years. This is not conducive to having a robust legal team that is ready to maneuver and maintain stability during challenging times. Disruptions to manual systems - and the inability to access contracts - can easily result in lost revenue or a failure to protect your company’s interests. And during difficult times like these, your contracts database becomes exceptionally important. Simply put, running a manual system brings enormous risk to your organization. Ironically, this source of risk comes from the very team focused on minimizing corporate risk in general.

There has been a lot of talk about force majeure clauses. What is force majeure and how does it impact a company? More so, how can AI help a company deal with such a clause?

During this crisis, a hot topic on many attorneys’ minds is whether and how force majeure clauses impact their agreements. IACCM states that during the Global Financial Crisis that lead to the Great Recession (2008), “Force majeure” was the second most negotiated term in contracts. With COVID-19 having such a powerful economic impact, businesses are now asking how force majeure clauses will affect their current obligations and contract performance. On a question like this, having better control and insight into contracts is highly enviable. IACCM’s recent briefing also notes that “a fortunate few will have robust and searchable repositories, and have deployed the sort of AI or NLP tools that support rapid analysis and review of the relevant terms.” To IACCM’s point, it is during difficult times that quick analyses of organizations’ contracts becomes particularly important. This should come as no surprise given that 56% of corporate counsel offices regularly analyze contract performance. So, during a crisis, analyses become even more crucial. A CLM using a trusted AI analytics engine - like IBM Watson - makes the difference between leading organizations and laggards.

Can you explain how AI & analytics affects a company during a crisis like this?

To gauge the impact of analytics during crises, the IACCM asked its membership about whether concerns over the coronavirus lead to possible policy changes. The results truly highlight the importance of trustworthy AI-based analytics - embedded in a robust, end-to-end CLM. A growing number of companies are able to assess these elements of their contract base, in real-time, regardless of circumstances or major events. And it is during times of crisis that management often wants to know of certain ‘exposure’ across many contracts, markets, or regions. With the right cloud-based analytics engine, this is an easy request. Aside from selecting trusted technologies, Gartner again provides sound advice. They suggest that “the technology marketplace is rife with hype from AI technology vendors looking for problems to solve.” Yet, they also point out that “many of these vendors have only a very basic understanding of legal requirements and workflows.” As such, it is equally important to find systems that benefit from attorneys’ input regarding the legal-tech product’s look and feel, as well as future roadmap. In this respect, “built by lawyers, for lawyers” takes on a much deeper meaning and context.

In terms of obligation management, think of any service obligation, service level agreement (SLA), or statement of work (SOW) that is embedded in the multitudes of organizational contracts. Naturally, any crisis of consequence will affect your service deliverables. If not yours, then surely it will impact those that your organization expects of its suppliers. These are included in your contracts. But are your contracts findable and available for your staff to assess? Related to the service obligations are the liabilities and indemnities, delayed or liquidated damages, and termination provisions. These may be well articulated in each of your agreements, but they must be referenceable and available to be read.

This is when the question of what a good CLM actually does arises. In the midst of a crisis, there is often a sudden need to quickly understand where your contracts stand. How many have certain provisions in place? What number of your contracts contain specific liability or indemnity clauses? Or which specific agreements contain a specific obligation? Here, cognitive searchability is the key, particularly when your entire team cannot go into the office to look up and find things. Aside from being able to extract terms or find key conditions using AI search, think about receiving help with contract summarizations and abstractions. Although not all CLM systems achieve this, legal team heads should seek the capability of the system to review documents for such obligations or terms. This goes beyond a simple exact search function. Rather, the AI component of CLM technologies allows for a cognitive search – one that ‘understands’ the search concept rather than simply searching on the exact words or phrase. Such tools place a legal team in a significantly stronger position than others, when everyone is now working from their home office as opposed to headquarters. So the important question is, which scenario would you rather have: the team equipped with a powerful CLM or not

On to a comprehensive end-to-end CLM solution… what does this encompass?

A sound, comprehensive end-to-end contract management solution must have the following features:

• Contract Onboarding
• Full Contract Repository       
• Smart Summaries (AI - NLP)        
• Contract Automation (automatic contract generation)        
• AI Analytics        
• Integrations Ecosystem (eSignatures, Negotiation, Workflow, SFDC)        
• Revision & Review Workflows

Do you think post COVID19, more organisations will actively adopt an analytics based CLM?

It is expected that this pandemic will continue to wreak havoc on economies worldover. Responsible organisations should have recommended their legal teams to work from home by now. What’s even more alarming about a pandemic like COVID19 is the possibility of a second wave so there is little logic to ‘hunkering down’ and ‘putting up’ with manual contract management systems. The first wave has caused sufficient damage to companies worldwide. If you are one of the 62% of organizations with a manual contract management process, you need to adopt an intelligent CLM - quickly. Yet 64% of survey respondents believe it will take a year to adopt an AI-based contract management system. But it is imperative to look for an out-of-the-box solution that can be up and operational within 3 months. If it takes any longer than this, you are putting your organization at risk through a continued productivity gap in your legal department. And no company can afford to have major productivity gaps during times of crisis.

For the 62% of legal teams lacking such core systems, this is a dire warning. There is little doubt that the crisis will be difficult. Yet the important lesson here is to stop procrastinating. Find a vendor who can help you migrate your legal systems online in the shortest time possible, with due compliance on technology.