Monish Darda, Author at Inc42 Media https://inc42.com/author/monish-darda/ India’s #1 Startup Media & Intelligence Platform Fri, 11 Oct 2024 05:04:31 +0000 en hourly 1 https://wordpress.org/?v=6.4.1 https://inc42.com/cdn-cgi/image/quality=75/https://asset.inc42.com/2021/09/cropped-inc42-favicon-1-32x32.png Monish Darda, Author at Inc42 Media https://inc42.com/author/monish-darda/ 32 32 How AI-Powered Contracts Are Strengthening Financial Health In A Regulatory Shift https://inc42.com/resources/how-ai-powered-contracts-are-strengthening-financial-health-in-a-regulatory-shift/ Sun, 13 Oct 2024 08:30:32 +0000 https://inc42.com/?p=481193 The regulatory environment is moving at breakneck speed. In sectors like tech and finance, where governments are trying to stay…]]>

The regulatory environment is moving at breakneck speed. In sectors like tech and finance, where governments are trying to stay ahead of technological advancements and emerging risks, the problem is especially pronounced.

AI is a prime example of how technology is shaping the regulatory landscape. In fact, a recent analyst study predicts that by 2028, 60% of governments worldwide will adopt a risk management approach in framing their AI and generative AI policies.

AI is just one facet of regulatory compliance that is driving change for today’s businesses. New and existing regulations impact many areas of commerce – employment, environmental, social, and governance (ESG) commitments, international and domestic trade, and financial operations, to name a few. Complicating matters further, regulations often vary across borders, trade blocs, and even languages. 

While regulation is imperative, it also creates huge compliance challenges that, if not properly managed, could have significant financial consequences for enterprises.

But there’s hope on the horizon. 

Impact Of Fast-Moving Regulations

To avoid negative financial consequences, business leaders must understand what’s at stake with non-compliance. Significant financial penalties, litigation, and reputational damage can erode revenue and threaten a company’s long-term stability and growth. 

For instance, the EU’s AI Act, a first-of-its-kind legislation, came into force across 27 member states in August. It emphasises monitoring the regulatory compliance of companies and their responsible use of AI. 

Failure to comply could result in fines at varying levels, depending on the severity of the violation and the company’s size. For example, non-compliance with high-risk AI systems could lead to fines of up to 7% of a company’s annual turnover or a maximum of 35 Mn EUR, whichever is greater.

Every relationship across the business ecosystem – whether with customers, partners or suppliers – represents a potential weak spot. But where there’s a business relationship, there’s also a contract and an opportunity to enforce regulatory standards. This makes contracts one of the most valuable resources in today’s environment, serving as the foundation for every great compliance strategy.

The ability to derive insights from contract data, gain visibility into potential risks, and drive contract performance is essential to ensure that regulations are met while protecting the bottom line. However, this is easier said than done, particularly when you have limited resources and time. 

AI Is Transforming Contracting

AI isn’t just the technology being regulated – interestingly, it’s also the tool that can help businesses comply with stringent and complex regulations globally. Beyond AI regulation, GenAI, in particular, can streamline compliance across various regulatory landscapes, reducing risk and enhancing efficiency. By integrating data across thousands of contracts, AI empowers decision-makers with visibility into business outcomes tied to revenue, savings, and risk. 

Whatever the regulation, AI-powered contracting solutions can extract obligations at scale to help businesses improve the transparency of their relationships and ensure that regulatory compliance clauses are fully realized and adhered to. And it does not stop there – with powerful GenAI-driven agentic frameworks that are evolving quickly, these solutions can also verify that those obligations are met in the normal course of business.

With critical information about business relationships at their fingertips, all leaders – from CFOs, and CPOs to general counsels – are better equipped to set their strategy in this rapidly shifting regulatory environment.

Automating Compliance

Implementing AI-driven solutions offers substantial benefits. With full visibility into contracts across the enterprise, teams can easily identify potential areas of non-compliance and continually monitor relationships to detect unauthorised terms and regulatory violations.

When new regulations are passed, business leaders can automatically pinpoint which business relationships are no longer compliant. For example, AI can assess risk during the negotiation process and ensure critical clauses are not overlooked when new contracts are signed.

AI can also suggest compliant language to optimise the contract, ultimately streamlining reviews while protecting the organisation. This enables legal teams to focus resources on negotiating high-risk agreements that require closer review, rather than touching every contract.

With agentic frameworks and more “thoughtful” large language models (LLMs) like OpenAI’s o1, it is now possible to analyse whether the transactions that result from these business relationships are compliant with the language and obligations in the contract. This adds tremendous value to the 70% value chain of the contract – the life of the contract beyond the negotiation and execution.

Compliance As A Driver Of Financial Stability

With AI as a partner in the regulatory arena, business leaders can focus on what matters most – saving money and driving revenue.

Contracts are the bedrock of business. But they can be a forgotten asset. AI in contracting ensures the full intent of every business relationship is realised in the real world, bringing potential cost- saving and revenue opportunities to the surface that might otherwise be overlooked.

Contract Intelligence finds value in agreements immediately and then enables continual performance across relationships well into the future, safeguarding your company’s financial health by preventing unwanted revenue leakage that eats away at cash flow and undermines the balance sheet.

Now that’s the sort of AI that everyone can get behind.

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How GenAI-Led Contract Intelligence Is Redefining Business Relationships https://inc42.com/resources/how-genai-led-contract-intelligence-is-redefining-business-relationships/ Sun, 25 Aug 2024 13:00:13 +0000 https://inc42.com/?p=475195 Earlier this year, the US investor guru Warren Buffett made headlines by describing artificial intelligence as a genie that “scares…]]>

Earlier this year, the US investor guru Warren Buffett made headlines by describing artificial intelligence as a genie that “scares the hell out of me.”

The Berkshire Hathaway chairman and CEO has long been known for his extraordinary foresight, something of a genie himself because of his ability to predict lucrative investment opportunities. His words carry weight, and when he expresses concern, people listen.

In this instance, while Buffett’s caution is understandable, the potential of AI may be greater than the risks.

Although disruptive technology is exciting, it can also raise concerns, particularly when even the AI scientists who developed it cannot fully explain the internal workings of its underlying mechanisms, such as transformers in GenAI. It is difficult to explain but the outcomes it delivers often feel nothing short of miraculous. 

The Potential Of Disruptive Technology

I liken GenAI to the dot-com era of the late 1990s and early 2000s, a time when everyone wanted to tap into first-of-a-kind technology in the hopes of discovering new areas for innovation.

Fast-forward two decades, and the power of the internet has been more fully realised. It has improved the way people live and how businesses run. I don’t believe GenAI will take two decades to be realised fully – the world is changing as we speak.

GenAI is just the beginning, marking a step toward artificial general intelligence (AGI), which can perform any intellectual task that can be accomplished by humans. Today’s GenAI already enables AI tools to think logically and creatively like humans. This convergence of human-like reasoning with machines’ vast computational power and data processing abilities is set to fundamentally transform business processes. For example, AI can analyse vast amounts of data at speeds far beyond human capability, identifying patterns and deriving insights that might otherwise go unnoticed. In contract management, this means AI can quickly review and analyse large volumes of commercial agreements to inform better decision-making and increase the pace of business. 

Reimagining Contracts With GenAI 

Contracts form the backbone of global commerce, defining the rules of business for large and small companies everywhere. It is a single source of truth that a business has with its suppliers, partners, and customers, defining compliance, expected obligations, and the intent of the relationship. This makes contract data one of the most valuable untapped assets in the enterprise. 

GenAI’s ability to think creatively and suggest actions within contracts has the potential to elevate commerce by optimising business relationships. This technology not only streamlines time-consuming and error-prone manual processes but also ensures the intent behind business relationships is fully realised. The benefits are twofold: enterprises can save money by reducing costs while also preventing revenue leakage, increasing revenue, reducing risk, and enhancing compliance.

Implementing GenAI In Contract Management

To effectively implement GenAI in contract management processes, businesses can follow these steps:

  1. Centralise contracts – In most enterprises, this is no small feat. To build a solid foundation for AI deployment, it may be necessary to phase the process out by department, region, or function. Once contracts are centralised, businesses will benefit from improved visibility and control over their contractual obligations.
  2. Identify contract-centric use cases – Focus on examining critical areas such as contract creation, negotiation, and execution, ensuring timely payments to suppliers, tracking customer payment schedules, and assessing specific regulatory risks. Identifying these use cases is essential for understanding where AI can deliver the most value.
  3. Automate use cases using GenAI-led contract intelligence – Automating contract-centric use cases can feel daunting for most enterprises. To manage this effectively, consider applying the 70/30 rule – prioritising automation for the use cases that offer the highest return on investment
  4. Realise the intent: This final step unlocks two significant benefits. First, leveraging AI with legacy contracts allows for a deeper understanding of business patterns. Second, applying GenAI ensures that contact-related transactions, such as payments and regulatory compliance, align with the original intent of the contract, providing greater accuracy and consistency.

When executed correctly, GenAI can substantially enhance business processes and deliver tangible value. It can reduce complexity and friction – the two deterrents to enterprise agility, allowing businesses to operate more efficiently and effectively. By transforming contract-driven processes, enterprises can optimise business outcomes around revenue, savings, and risk.  

Looking Ahead

There has never been a more exciting time in business than now. In 20 years, we’ll reflect and marvel at how little we knew about AI in its early days and how dramatically it has changed our lives for the better. However, to harness AI’s full potential, we must approach it responsibly, starting with a clear understanding of its value within our organisations, its power and its limitations. 

By embracing GenAI, businesses can not only navigate the complexities of modern commerce in today’s ever-changing economic environment but also set the stage for future success in an increasingly AI-driven world.

Get this right, and Warren Buffett will realise he had nothing to fear.

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