Because a contract comes with both opportunity and risk, contract management must include both data analysis and risk prevention.
Contractual agreements contain critical information that can have positive and negative effects on an organization. Without procedures in place to identify and monitor contract risk, organizations can be at a disadvantage, possibly leading to higher costs, compliance violations, and, in many cases, unfavorable lawsuits. Learn to prevent these situations by utilizing a strategy to help assess the risk associated with your contracts. Early identification and prevention will allow for you and your team to address concerns early on rather than waiting for negative consequences to transpire.
Failure to Prevent Contract Risk May Result in Increased Costs
It’s important to review what’s written in a contract down to every detail. However, this task can be extremely time-consuming for the busy paralegal, contract administrator, general counsel, or other legal professional, and the cost additional labor support creates is often overlooked. Because of this, assessing contract risk at this level of detail can be difficult to execute without incurring extra, unnecessary costs and organization's may not realize how much they are spending.
Organizations should have a process in place for assessing contract risk to ensure they prevent as much of it as possible. One way to identify this information is through intelligent software, supported by AI and machine learning, that can help proactively identify risk from recent agreements and send out alerts for overlooked risk (without requiring copious amounts of labor from valuable employees).
Using Artificial Intelligence to Proactively Identify Risk
Intelligent contract management software can help you and your team be alerted of contract-associated risk. Leading solutions have advanced capabilities, providing system users with improved contract oversight, proactive risk identification, and continuous risk prevention.
Integrated AI and machine learning tools can be used to assess contract language when adding new contracts to your contract management system while periodically screening old contracts for sensitive data. By utilizing this continuous analysis, you can identify potential risk in the early stages of a contract while also monitoring agreements after the fact. CobbleStone’s proprietary tool, VISDOM℠ AI and machine learning, helps contract professionals with this task, eliminating hours of dreaded contract review and analysis. Check out our blog post on VISDOM AI and machine learning to discover the benefits of a smart contract analysis and risk assessment tool.
Risk Assessment Mapping With VISDOM
VISDOM gives Contract Insight users an opportunity to significantly reduce contract risk.
When adding a new contract to CobbleStone's Contract Insight™, VISDOM helps identify potential risk by analyzing document text, allowing the system to identify both good and bad language in a contract based on rules-based sentiment and risk-level ratings.
Easily identify opportunities and mitigate risk based on historical data and organizational goals without having to evaluate each contract manually.
Be notified of sensitive data in your system such as:
- PII (personally identifiable information)
- Employee data
- Routing numbers
- Credit card numbers
- SSN (social security numbers)
- And more
You can configure risk analysis rules in your Contract Insight system to run an analysis once a week, once a month, etc. CobbleStone recommends running an analysis once a week to allow enough time for trends to show and for a close-to-real-time data analysis.
Create a Risk Assessment Strategy
A risk assessment strategy can help organizations feel confident they are doing everything possible to stay compliant, avoid unnecessary costs, and be alerted of potential future risk. Use this 3-step risk assessment strategy as a guide to help you and your team identify and prevent unwanted risk.
- Invest in smart contract management software
Determine keywords, phrases, and clauses your organization deems a “risk” to alert users of sensitive data
Use smart tools within your software to analyze contract data and assess any risk associated with each contract
Following these simple steps can help your organization easily identify contract risk and reduce costs.