2024 Contract Management Trends: Smart Contracts, AI Regulation and More
Contract management has come a long way from paper and pen and metal filing cabinets. Today’s contract management is faster, easier, more intelligent and less prone to errors thanks to digitization. If you’re wondering what’s next in the evolution of contracts—the foundation of so many business operations and transactions—this is a good place to start. In this blog, we explore several developments that will likely impact your contract management in the year ahead, ranging from enhanced collaboration to a new focus on corporate responsibility requirements to AI. Here are the trends you can expect in 2024 and what they mean for your business.
1. Increasing use of natively digital smart contracts
If you handle agreements at your organization, you know that contract generation and negotiation can be time-consuming and inefficient. Most businesses follow the same process, beginning with a .docx file. After one party creates a document, the other party marks it up and returns it via email. This often lengthy process continues until negotiation is complete and the agreement is converted into a PDF. This change in format typically represents the end of negotiation and the finalization of the agreement.
Beyond inefficiency, this process has a number of limitations. Introduced into the market about 30 years ago, PDFs are becoming relics. They require considerable customization to become mobile-friendly and don’t lend themselves to easy editing or tracking changes—two essential aspects of contracting. Companies today need a document format specifically for agreements, with more capabilities than a PDF.
Fortunately, there’s a growing shift in the contract generation and negotiation process from static PDFs toward digitally native smart legal contracts. These new contracts exist in collaborative web environments that both parties can easily use. For instance, parties can drag and drop clauses into an agreement and connect to data sources like SAP or Salesforce, allowing for seamless contract data entry and updates to the source after signing. By permanently linking contracts with the data used to generate them, users can regain valuable information currently lost in the PDF generation process. Rather than signing documents with extensive text, parties will interact with digital forms, complete with superior user interfaces, on all devices for a modern, engaging, app-based experience.
2. Expanding contract collaboration within the tools teams already use
Tools that facilitate collaboration among teams have become even more essential over the past few years. Google Docs, for instance, is now an increasingly common choice for contract generation. In the year ahead, thanks to integrations with contract management systems, we’ll see even more contract work take place in the areas where teams already collaborate and work, including apps like Zoom, Teams, Slack, WhatsApp, Microsoft Office 365 and Google Docs.
These integrations, with their single sign-on capabilities, enable seamless access to contract management system functionalities right from within favorite apps. As more organizations choose to take advantage of these capabilities, contracting work will become even more collaborative and convenient for teams, especially those that are geographically distributed.
3. Using AI-enhanced negotiation and post-signing workflows
AI isn’t quite ready to write contracts on its own, but it can help summarize agreements and trigger alerts based on the identification of risks and opportunities. This, of course, can accelerate the contract review process. During renewals, AI also enables rapid updating of contract terms. Today, some companies are experimenting with the use of AI-powered chatbots for autonomous negotiations to free up personnel for other tasks. In 2024, as AI matures, this could become more popular for the negotiation of standard agreements as organizations continue to seek ways to expedite contract workflows.
Machine learning models may also assist organizations in selecting clauses that counterparties will likely accept. Because few organizations have solid metrics on how contract terms and clauses correlate with business successes or failures, many struggle to find the clauses that are most appropriate and effective. Once teams have the capability to extract agreement data from the platforms used to generate contracts, they will be able to determine which contract language yields successful negotiations.
While detection capabilities for obligation management currently exist, like the detection of contract expiration dates, the next step is to connect to real-world data. Then, AI can determine the best next step for a contract based on actual events that have taken place, saving money and reducing risk.
4. New legislation addressing data privacy and AI
Lawmakers around the globe, from Brazil to Japan, are beginning to draft regulations and guidelines informing how companies develop AI solutions, handle customer data and more. Wherever you are in the world, it’s essential to carefully consider the risks associated with AI technology. Unlike prior generations of technology, now when you’re in the market for new tech, especially any that leverages AI, take the time to find a reputable and trusted digital solutions provider. More than ever, it’s critical to ask who would have access to your company’s data if you were to partner with the provider, how they intend to use your data and whether they have plans to anonymize and de-identify it.
Not doing your due diligence before signing a deal can have serious ramifications. Case in point: In the European Union, parliament recently came to an agreement on rules for its groundbreaking AI Act. Although the law still has to be formally passed in 2024, it paves the way for a global standard to classify AI risk, subjecting organizations to regulations according to the level of risk their systems pose. Organizations also face transparent reporting requirements and penalties for noncompliance. There have been a number of AI bills proposed in the US but they have not been enacted by Congress.
5. Realizing inclusive economic growth through contracts
Bringing greater sustainability, resilience and innovation to communities around the world is increasingly top of mind for C-suite executives. With contracts being an essential part of business, one way to progress toward these goals is by increasing access to contract technology. Even more, as people around the world continue to rely on their smartphones for business communication, contract technology providers will offer new, mobile-friendly features.
This broad trend is exemplified by integrations with WhatsApp, a messaging app with two billion users in more than 180 countries. For example, with the DocuSign WhatsApp integration, users can sign and receive notifications about agreements within WhatsApp wherever they are at nearly any time. The ability to manage agreements in the palm of a hand facilitates business and brings the potential for economic growth to a community of new users and business owners who may not have access to laptops or desktop computers.
6. Continuing digitization of identity verification
With so many business processes now taking place online, agreement processes like identity verification are gaining even greater traction. Many contracts in fields like financial services and human resources contain sensitive information that’s essential to keep secure, including bank account numbers and Social Security numbers. As a result, governments around the world, particularly in the European Union, turn to digital identity verification to expedite and streamline identity proofing and authentication.
If your organization is interested in implementing a digital identity verification solution, take time to research vendors. Reputable providers offer robust security measures, including encryption such as a PKI to authenticate users. They also offer a standout user experience, including SMS capabilities, to ensure their technology is user-friendly and accessible.
7. Trickling down: the rising adoption of contracting technology among small businesses
Often thought of as an enterprise-only solution, contract lifecycle management (CLM) is increasingly in demand across all sizes of organizations, even SMBs. In recognition of the SMB market size and needs—like uniting stakeholders or implementing compliance guardrails—CLM providers are moving toward a more modular approach, allowing users to purchase only the components of CLM that they need most.
This modular approach can make contract management feasible on a more limited budget. SMBs, for instance, can get repository and contract generation capabilities without other aspects of CLM, such as contract analysis with AI, which might not be necessary for small organizations.
8. Adhering to corporate responsibility requirements
In addition to AI legislation, Europe is also contending with new requirements to disclose corporate responsibility policies. Because supply chain emissions are often the largest contributor to a company’s greenhouse gas footprint, adding sustainability requirements in addendums to vendor contracts helps companies meet their climate goals. European companies will look to include corporate responsibility clauses and addendums in their agreements and report how their vendors are adhering to corporate responsibility requirements.
Similarly, more jurisdictions in the U.S. and across the globe may require organizations to publicly disclose greenhouse gas emissions moving forward. Many organizations will look for science-based targets and climate commitments in their vendor agreements in the year ahead to prepare for the requirement.
Set your company up for success in 2024
Contract management is an essential part of any organization’s productivity and digital transformation strategy, and staying ahead of the trends can help you keep pace with changes. Get ahead next year by investing in a contract lifecycle management solution that’s already forward-thinking.
Learn more about how DocuSign CLM can help your organization automate tasks, manage complex workflows and remove blockers to work more efficiently.