The potential impact of Generative Artificial Intelligence (Generative AI) on the contract life cycle management process

How can Generative AI be used to manage the obligations of contracts and automate contract processes effectively—and do so safely? In today’s rapidly evolving business landscape, legal departments face increasing pressure to manage contracts efficiently and mitigate risks effectively. What strategies can be employed to reduce the need for re-keying, reduce errors, enhance efficiency, and help support contract transformation?

The 16th annual Law Department Operations Survey lays out the current landscape and future potential of technology, emphasizing the critical role of advanced tools like CLM and Generative AI. For example, 52% of surveyed legal operations professionals report having CLM technology to support pre-execution contract work, and 60% say they have it for post-execution work. The effectiveness of these systems appears to be still maturing, with many departments working to enhance their capabilities.

Let’s dive into the findings of the survey.

Tighter deadlines, more compliance, greater complexity

Legal departments may not only be burdened with a daunting volume of complex contracts but also often have to be able to work in multiple jurisdictions and regulatory environments. These challenges may persist regardless of the size of a legal department and may be compounded by the demands of both speed and compliance. Traditional methods, which often involve manual processes and disparate systems, are often found to be no longer sufficient as they can lead to errors, increased costs, and missed opportunities for optimization.

Understanding your CLM stage: How to progress

As legal departments face these challenges, the maturity of their CLM systems can be a deciding factor as to how well they’ll thrive.

Initial stages of CLM adoption often create a centralized repository for contract storage, which may evolve into more sophisticated functionalities like automated workflow capabilities, template management, and clause libraries. Later stages, however, realize the greater potential of CLM by integrating analytics and AI-driven insights. As a result, streamlined CLM systems with strategic data-driven insights can aid in decision-making and risk management.

Accelerating CLM with Generative AI

By automating complex tasks such as document drafting, data analysis, and risk assessment, Generative AI is set to potentially revolutionize the way legal departments operate, especially when it comes to enhancing efficiency and accuracy.

The integration of Generative AI into CLM systems may enable legal teams to handle higher volumes of contracts with greater precision, freeing up time to focus on strategic initiatives. This integration seeks to enhance decision-making and provide insights into contractual risks, with growing optimism about its broader application in legal departments.

Key strategies for effective change management

Getting the most out of CLM systems and Generative AI requires effective change management. Adopting these new technologies often involves managing a cultural shift within the organization, from training staff to aligning the new systems with existing processes. Leading practices for adoption can apply: engagement of stakeholders from the outset, clear communication of the benefits, and continuous support. It’s also good to adopt a phased approach—starting small, demonstrating quick wins, and scaling gradually. This often helps to build confidence and allow for a smoother integration of the technology across the department.

Conclusion

The journey toward digital transformation in legal departments might appear challenging—but shows promise of a big upside. By embracing a thoughtful, deliberate approach to CLM systems and Generative AI, legal teams can significantly enhance their operational efficiency and strategic influence within the organization. However, the key to unlocking these benefits lies in recognizing the stages of CLM maturity, leveraging the capabilities of Generative AI, and implementing change management practices.

Let us help guide you through the crucial complexities of adopting these technologies—identifying whether they not only address your current challenges but also assisting in positioning your organization in an increasingly digital legal environment.