Business has never been more complicated in the legal arena. The role of today’s General Counsel (GC), supported by in-house legal teams, has gone from providing sound legal advice to also delivering strategy and direction in both legal and business matters. Below Bryan Melchionda, Director of Alliances at Seal Software, explains for Lawyer Monthly why general counsels are often the real superheroes behind strong business decisions.
It’s no surprise that GC’s often feel that they are expected to become a “superhero” of sorts tasked, as they are, with helping their organization drive down costs, increase efficiency and spot new sources of revenue.
Consequently, the general counsel and their team are looking for effective ways to collect, process and utilize legal information to actively support decision-making and extract value that can be seized upon to make a real difference in the direction and velocity of business.
Taking control of contracts
With more and more regulation, providing timely advice is becoming increasingly difficult. Increasingly, silos within legal departments and businesses result in less coordination – and consequently diminished insight – across groups making it even more difficult for the GC’s office to get the information they need, when they need it.
There is much talk about gaining control of contracts and therefore organizational efficiency. But quantitatively, how and why is this so important? If you combine reports delivering metrics around the business problem, the storyline is quite concerning for organizations, their customers, and employees. However, the opportunity cost of not understanding what’s in your contracts is high and the opportunity to gain back lost revenue is tremendous.
Employing artificial intelligence (AI) allows large matrix organizations to maximize revenue and mitigate risks associated with contractual documents, systems, and processes. It is arguably mission-critical for enterprises and large matrix organizations to better understand the risks and opportunities associated with their contracts. Often this is driven by regulatory requirements with data buried in contracts, such as QFCs and ISDAs, which needs to be aggregated for submission to meet a compliance mandates.
Automated discovery and analysis
The latest legal-tech platforms perform automated discovery of contracts across entire organizations and bring them into a centralized repository for extracting all the valuable terms, provisions, and clauses buried in the text. This allows organizations to discover hidden revenue streams, improve business efficiency and build intelligence around the data already available to them.
Using a blend of proprietary AI-driven technologies including natural language processing (NLP), machine learning (ML) and latent semantic indexing (LSI), the best platforms identify relationships between different terms and concepts located in unstructured contract terms, across all contractual paper, to meet the demands of any future event such as litigation, regulatory requests, and compliance demands.
The key to accuracy and scalability with any system which uses ML is the ability to train it to ensure it knows what to look for and how to analyze it. The best platforms allow end users to quickly and intuitively create customized extraction policies (ML models), without the need for data scientists, consultants, or technical staff.
Under existing and emerging regulatory frameworks, such as GDPR, organizations need to understand the clauses and data hidden in contracts to comply. With the cost and time associated with manual contract review reaching into tens of millions of dollars, automation of this process is indisputably beneficial.
Unleashed business outcomes
Contracts and regulatory issues bring with them high-risk factors concerning prevalence, financial exposure, the volume of rules and potential reputational risk. When you look at the sheer volume of contracts most organizations have – which often number in the tens of thousands, if not hundreds of thousands – it is easy to see every single one of them as unleashed potential to positively affect business outcomes.
IACCM, the non-profit global contract management association, has indicated that waste is typically between 4% and 9% of total spend]. So, if a company’s annual spend is $1 billion, working from the lower%age alone, it is losing $40 million. Consider that if that same organization can identify 50% of that loss, equating to a staggering $20 million, and only half of that figure is actually recoverable, that’s a $10 million savings. How many other projects are you working on this year with that kind of ROI?
At the end of the day, US companies alone are losing up to 9.2% of their top line revenue due to these inefficiencies–data indicates that this figure is even higher in other regions of the world. The legal department, too often seen as a cost center, would be viewed in a very different light of the general counsel was able to guarantee a recovery of 9.2% in top-line annual revenue through identifying weaknesses in the contracting process.
This is the stuff from which General Counsel Superheroes are made.