Monish Darda, CTO and Co-founder of Icertis, discusses how generative AI and machine learning are revolutionizing business contracts and transforming the enterprise.
The UK is not out of the inflationary woods just yet as the economy is expected to flat line for the next four quarters, with the Bank of England signaling a 50-50 chance of recession by mid-2024. Economists are also expecting a wave of corporate insolvencies as more businesses refinance at higher rates. It is within this commercial turbulence that companies are spearheading into the New Year.
With enterprises continuing to feel the pressure regarding their supply chains and bottom line, it is no surprise that c-level executives are looking to emerging technologies like AI to provide the edge they need to stay competitive in an unpredictable and fluctuating economy.
Despite this spotlight, significant questions remain about the hype around generative AI and how business leaders can harness its full potential within use cases that will deliver tangible and immediate outcomes.
The Impact of Generative AI on Financial Performance
New research reveals that more than 80 percent of executives expect generative AI to impact their bottom line within the next five years, however, the influence of AI on financial performance will reach a critical inflection point for companies across all industries in the year ahead.
Leaders expect competition to become fiercer and workforces to be transformed, all in the coming months, leading 56 percent of senior executives to prioritize AI use cases that have an immediate impact on revenue or cost. 2024 will therefore be the year of action for the c-suite as they put processes in place that leverage AI to ultimately enable an advantage in their market.
The weighty financial impact that AI can have is clear, with a recent McKinsey report suggesting AI may add up to 0.6 percent in annual labor productivity growth over the next two decades, generating as much as $4.4 trillion in additional value each year.
However, for AI to effectively drive growth, businesses need to act now or risk falling behind. Enterprises should carefully evaluate the AI tools that are available and strategically embrace them as instruments to enhance key business goals like revenue growth.
The Adoption of AI in Contracting
One of the most impactful ways AI can be implemented within an enterprise is with Contract Lifecycle Management (CLM). By enhancing business transactions through contract management solutions, large enterprises can fortify their economic resilience, readying them to face the financial perils they are predicted to encounter in the next calendar year.
Commercial agreements define every relationship and govern each dollar in and out of the enterprise. By digitally transforming the creation and post-execution management of these documents and the data they contain, organizations can empower strategic decision-making to reduce costs and mitigate risks in any macro environment.
For example, AI and machine learning provide new insights with every transaction to support strategic outcomes for finance, legal, and procurement teams. By enabling the speed and scale to manage complex contract portfolios, AI-powered CLM – also known as contract intelligence – delivers enhanced visibility into critical business data so internal teams can work smarter, not harder. With generative AI applications in contracting, the automation of routine workflows, summarization of hundreds of agreements, and AI-driven risk assessment of portfolios allow c-suite leaders to maximize business value by allocating their resources to strategic initiatives that directly impact revenue.
Compliance, Regulation, and Risk
The integration of generative AI into contracts also allows organizations to track supplier performance and regulation adherence, ultimately avoiding financial penalties and loss of customer and shareholder trust. Imagine a company gearing up for the implementation of the EU’s Corporate Sustainability Reporting Directives. By leveraging AI in evaluating supplier contracts, the system autonomously identifies crucial clauses related to climate concerns and assesses whether suppliers have met these obligations.
Integrating this insightful analysis into supplier negotiations can result in more favorable contract terms and enhanced compliance with regulations. By connecting contract data across the enterprise and integrating it with core systems, AI enables analytics and automation at scale so businesses can reduce risk and create the agility they need to meet evolving governance requirements. Such a proactive approach not only fosters optimal Environmental, Social, and Governance (ESG) outcomes but also cultivates positive impacts on both revenue and the environment.
The Future of the Digital Enterprise
Contracts play an essential role in every company’s digital transformation, and their underestimated potential leaves businesses exposed to an array of missed opportunities. These include the ability to increase revenue, reduce costs, improve compliance, and eliminate risk – outcomes that are vital in the current business climate.
A decade ago, contract lifecycle management was little more than a repository of scanned documents. By digitizing these crucial documents and applying AI to help analyze, understand, and act on agreements, businesses can rely on contract data as a wealth of knowledge that directly translates into their profit margins.
This untapped potential has the ability to completely transform organizations and, ultimately their bottom-line performance. Companies that recognize and invest in AI-powered contracting will be the ones who emerge victorious over their competitors and thrive at the other end of a financially turbulent period of uncertainty.
