Financial services is one industry where technological breakthroughs are a common sight. Innovations in technology have enabled this industry to go completely mobile and be able to serve its customers 24*7 through automated processes, chatbots, and mobile apps. Despite this industry’s constant efforts to be at the top of the innovation pyramid, they are still lagging behind when it comes to contract management. But not for long! With the industry realizing the effect of advanced legal technology in turning contracts into strategic, accessible documents, it has already started taking strides towards digitally transforming its contract management processes.
Contracts and financial services
Contracts form the backbone of this industry, considering most of its transactions are governed by complex contracts. This also means these organizations have to deal in thousands and often tens of thousands of high value, high contracts yearly. As a heavily regulated industry, banks and financial institutes also need to maintain an accurate audit trail, requiring thorough management of every document attached to every contract. Having to manage and monitor such a large number of contracts and documents is nearly impossible if dealt with manually. This can result in errors and omissions which can have severe repercussions.
A centralized contract management system with integrated repository and processes enables a seamless, centralized view of all contracts in a single unified platform. Customizable dashboards enable real-time view into all important contract data like approaching deadlines, renewals, obligations, contract value, etc. Pre-configured automated workflows driven by Robotic Process Automation are a great way to ensure contract documents are routed to the right stakeholders for reviews and negotiations.
Compliance and financial services
Banking and financial services industry is one of the most highly regulated industries with strict government, state and federal regulations and compliance. The effort to track and abide by all regulations such as GLBA, BSA, FACTA, PCI, NIST, and guidance from the FFIEC. The constant updates and changes in regulations like in the case of IFRS 25 & 16, LIBOR, etc. has made compliance an ever-increasing challenge. Non-compliance in this industry is not looked at kindly and can have harsh implications on the financial and reputational standing of a company. In 2016, the FCA fined a major bank a significant fine of $142 million for breach of principle 10.
With so much at stake, t is not enough to just ensure compliance in the future contracts but to also update it in all past contracts. That’s exactly what an advanced contract management system can deliver. An updated, smart clause library can automatically identify all redundant clauses in the past and on-going contracts and update them with any updated/new clauses and regulations. Pre-approved templates and hints ensure no clauses or regulations are missed during contract authoring. During post-award, non-compliance of pre-configured milestones or obligations is immediately brought to attention through triggers and alerts and can be resolved immediately.
Data security and financial services
The financial services industry experiences nearly 35% of all data breaches, making it the most-breached industry. As this industry has numerous interconnected systems and processes millions of transactions, it is more prone to the risk of data breach. And with the increasing number and frequency of data breaches, web applications attacks and insider threats emerge new legal risks of litigation and heavy regulatory fines. Owing to the sensitive data this industry deals in and the lurking risk of data breach, regulators have increased the number of privacy regulations and the liabilities of non-compliance thereof.
Artificial Intelligence powered contract management can be designed with SOC2 Type 2 certified technology architecture and secure access controls configurable by role or other parameters. This ensures that only the approved employees can access certain contract data and it stays protected from any unauthorized entry. A secure architecture and data protection ensure the contract data stays protected from any outside or future threats.
The above observations are just a few issues facing the financial services industry and the many benefits Artificial Intelligence powered Contract Management can unlock for it. To know more about how AI CLM can transform contract management and empower financial services’ legal teams, join us for our Inaugural breakfast session at New York City! Register now!