Contract managers, contract administrators, law firms, and legal teams can leverage legal analytics to gain a competitive advantage and make informed, strategic decisions. Whether you are new to contract data analytics or a well-seasoned user of advanced legal analytics tools, here are five common questions answered.
A: Legal analytics enable legal professionals to gain insights and make informed decisions. They involve collecting, organizing, and analyzing various contract data points, such as the total number of contracts, average contract value, budget trends, yearly spending, etc. For example, users of legal analytics tools can view the contract and budget amounts of the current year versus those of last year in a contract amount, a percentage amount, and a graphical display.
A: Legal analytics greatly enhance contract management by providing the following benefits:
1. Risk Mitigation: Legal analytics help identify potential risks and vulnerabilities in contracts by analyzing historical data. For example, by quickly accessing and analyzing past contract disputes, legal professionals can identify clauses or contract terms that have led to conflicts in the past and proactively mitigate those risks in future contracts. Additionally, they can proactively map risk variables on a risk and opportunity assessment matrix and analyze their teams' usage of risk mitigation tools. This proactivity allows legal professionals to ensure compliance with legal requirements and minimize the likelihood of costly legal disputes.
Risk Assessment Matrix
2. Contract Performance Evaluation: Legal analytics can provide insights into contract performance by allowing the easy configuration of reports on key metrics such as contract cycle time, renewal rates, and dispute resolution outcomes. For instance, by analyzing the time it takes to negotiate and finalize contracts, legal professionals can identify bottlenecks in the contract management process and implement strategies to improve efficiency. Similarly, by analyzing renewal rates, legal professionals can then evaluate the effectiveness of contract terms and identify areas for improvement. This information helps evaluate the efficacy of contract management processes and identify areas for improvement.
3. Cost Reduction: Legal analytics identify inefficiencies in contract management processes, leading to cost savings. For example, by analyzing the time and resources spent on contract review and approval, legal professionals can identify opportunities to streamline workflows and reduce inefficient efforts. This analysis can result in significant cost savings for organizations by prompting them to optimize resource allocation and reduce the need for time-wasting contract management tasks. They can also implement automated task escalation so that tasks not being completed in a certain timeframe can be escalated to another resource for completion before their deadline.
4. Contract Negotiation Support: Legal analytics offers valuable insights into negotiation strategies by analyzing historical data on similar contracts. For instance, by analyzing the negotiation outcomes of similar contracts, legal professionals can identify contracts and clauses that have led to favorable outcomes. This knowledge helps legal professionals negotiate contracts more effectively and achieve favorable outcomes for their clients or organizations. Contracts and clauses that have led to favorable outcomes can be added to a preferred document template and clause library, respectively.
A: Contract management software plays a crucial role in enabling legal analytics by providing a centralized platform to store, search/access, manage, and analyze contract data. Key features of contract management software that facilitate legal analytics include:
1. Data Extraction and Organization: Contract management software allows legal professionals to extract, capture, and organize contract data in a structured manner via tidy metadata fields. For example, contract management software enables the creation of standardized contract templates and the automated extraction of key contract data, such as parties involved, contract terms, and important dates. This structured data enables more effective application of legal analytics techniques.
2. Advanced Searching and Reporting: Contract management software offers advanced searching and reporting capabilities, allowing legal professionals to retrieve specific contract data quickly and perform detailed one-off or bulk analyses based on various criteria. For instance, legal professionals can search for contracts with specific clauses or terms and analyze the outcomes of those contracts to identify trends or patterns. This analysis helps in making data-driven decisions and gaining insights from contract data.
3. Data Visualization: Leading contract management software includes data visualization tools such as charts, graphs, and dashboards, making it easier to understand complex contract data and identify patterns, trends, and outliers. For example, legal professionals can use a custom report designer and executive graphical dashboards to analyze contract performance metrics over time or compare the performance of different contract types. This visual representation enhances the understanding of contract data and facilitates effective communication of insights.
4. Integration with External Data Sources: Contract management software can integrate with external data sources, such as ERPs and CRMs, to enrich contract data. This integration enables legal professionals to gain a comprehensive view and make more accurate predictions and assessments. For example, integrating contract management software with CRMs allows teams to analyze contracts against the customers with which they are associated.
A: While legal analytics offers numerous benefits, organizations should keep these common challenges in mind before implementing it for contract management:
1. Data Quality and Availability: The success of legal analytics relies on the quality and availability of contract data. Organizations need to ensure that contract data is accurate, complete, and up-to-date, which may require data cleansing and standardization processes. For example, inconsistent or incomplete contract data can lead to inaccurate analysis and unreliable insights. Therefore, organizations need to establish data governance practices and implement processes to ensure data quality and availability. The good thing is that contract management software itself can help with this!
2. Data Privacy and Security: Legal professionals deal with sensitive and confidential information, so organizations must implement robust security measures to protect contract data and comply with data privacy regulations. For instance, contract management software should have strong access controls, encryption mechanisms, and audit trails to safeguard contract data from unauthorized access or breaches. Additionally, organizations need to comply with data privacy regulations, such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA), when collecting, storing, and analyzing contract data. Additionally, the chosen contract management software solution for legal analytics should boast robust security attestations, such as SOC 1, SOC 2, and Privacy Shield compliance.
3. User Adoption and Training: Introducing legal analytics and contract management software requires user adoption and training. Legal professionals need to be trained on how to effectively use the software and interpret the analytics insights. The solution you select should provide a means to ensure a smooth transition and rapid user adoption. For example, organizations can enjoy training sessions, workshops, or online resources to educate legal professionals about the benefits of legal analytics and how to leverage contract management software effectively. User feedback and continuous support are also essential to encourage user adoption and address any challenges or concerns.
A: By leveraging data analysis and statistical techniques, legal analytics revolutionize contract management by enabling legal professionals to gain valuable insights, mitigate risks, evaluate contract performance, reduce costs, and improve negotiation strategies. Contract management software provides the necessary tools and features to capture, organize, analyze, and visualize contract data, enabling effective use of legal analytics. Despite the challenges, organizations can overcome them with proper data management, security measures, and user training with the best contract management software solution for their needs.
Want to see award-winning contract management software with native artificial intelligence and machine learning in action? Book a free demo today!
*Legal Disclaimer: This article is not legal advice. The content of this article is for general informational and educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorney for legal advice regarding any particular legal matter.