contract compliance trends: optimizing technology and outsourcing · 2019-12-01 · contract...

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Contract Compliance Trends:

Optimizing Technology and

Outsourcing

Senior Fellow from Practice:

Christopher S. Harrison, CEO of Sterlington Legal Solutions

Guest Speakers:

Richard Canedo, Partner & Director of A.I. at Sterlington Legal SolutionsJamie Sklar, General Counsel at Fiduciary Network, LLC

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Overview of Session Content

PART I: Why Contract Compliance Matters

PART II: Contrasting Traditional vs. Innovative Solutions to Contract Compliance

PART III: Perspectives from a General Counsel

CONCLUDING REMARKS


PART 1: Why Contract Compliance Matters, But Too Often Neglected

Why Matters

• Compare contract compliance risks to regulatory compliance in terms of

• Impact for failure to comply • Costs to maintain compliance

• Contract compliance risks • Breach • Losing Commercial Rights

Why Neglected• Contract compliance often

overlooked, however, compared to regulatory compliance

• Increasing complexity and quantity of contracts make contract management burdensome for in-house counsel and too costly to outsource


Traditional Compliance

• Billable hour incentivizes inefficiency• Disincentive to explore time-saving

technology• Low-level work delegated to junior

associates sometimes at client expense

Traditional Law Firm Model

• Best suited to certain kinds of problems/tasks, such as complex deal work

• Post-deal contract management not part of traditional law firm business model; ignores needs of in-house

Traditional Solution

• Stuck in contracts with vendors • Difficulty in training/adapting to new

technology • Lack of will/interest in disrupting

profitable model

Legacy Systems


Traditional Compliance Model – Assessment

The Main 'Cons’

• Costly, esp if you ask for more detail on a diligence task

• Law firms do not consider long-term post-deal contract compliance as part of their job

Cons

The Main 'Pros’ of this traditional method

• Gets the job done, in the short term.

• Expertise and specialized advice on deals

Pros


Traditional Compliance – In HousePost-deal, In-house Counsel Left Holding The Bag On:

• What contractual provisions to prioritize • Where/how to track key obligations

Maintaining Compliance • Gets in the way of day-to-day work• Often gets left to the side

Pros (cost) • Short-term• Costs less

Cons • Speed• Quality

Long-term Con • Cost savings of not investing time/energy on prudent contract compliance can

catch up with one big breach • Loss of a commercial right • Costly in terms of money, personnel and firm reputation


There Must Be a Better Way

Law firm aversion to innovation and technology suggests change will be slow --"Chief Legal Officers have rated law firms a median score of 3 out of 10 every year from 2009 to 2016 in the question of "law firms' seriousness about changing their

legal service delivery model"Source: [1] 2016 Altman Weil Chief Legal Officer Survey

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PART 2 – Innovative Approach to Contract Compliance

Tech Savvy and Data Driven Law

Process Optimizing,Alt Fee Arrangement,

Innovative

vs.

Apprentice model, Billable Hour,

Legacy Systems

Holistic Thinkingvs.

Transactional


Innovative Approach – Sample Problem

Scenario: Portfolio Manager bids on an auction for a large portfolio of life settlements in the tertiary market.

PM needs legal diligence for (1) valuation of legal risk and (2) for maintaining/servicing the policies (if acquired).

Ideal solution for PM’s legal needs:– Fast– Complete – Analyzable– Transparent pricing

Traditional legal method would be too slow, incomplete, not detailed enough and cost too much.


Four Key Steps To Innovative Approach

Legal Analysis as Data Analysis

Data Extraction

Turn legal textinto analyzable‘data’ using LegalAI.

Data Analysis

Analyzing theresults of dataextraction

Database Management

Maintaining keydata points andresults of analysis

Automating Processes and Integrating Systems

Automatingeverything thatcan be automatedfrom the databaseandintegrating withother systems, i.e, financial, auditing, reports.


Data Extraction with Legal AI

• Converting unstructured legal text into structured, digitized form• Advantage of having entire set of docs in OCR

AI legal tech (NLP+ML)

• Legal AI is fast and easy for standard contract terms • Automatically find easy data points; reviewer often only confirms AI's result

Speed

• Great for teaching the AI to find specialized provisions, esp in large doc sets• Simultaneously train junior associate and AI with systematic approach.

‘Training’ the AI (machine learning)

• Project management tools allow many attorneys to review documents at once• Certain provision types can be flagged for specialists (Tax, Finance, ERISA)• Workflows streamline senior associate review of junior work

Legal AI project management tools


Sample Solution for Innovative Approach

Fast, complete, analyzable, fixed price (per policy).


Sample Life Insurance Policy ‘Data Page’


Automating Legal Analysis of a Document Type

Problem – Thousands of HIPAA forms in data set. Does

each insured have a compliant, transferable HIPAA form (so that the new owner

may obtain the Insured’s medical records)?

HIIPAA forms must have a number of provisions to be valid; older forms often are

missing a necessary provision.

With Legal AI, an attorney can program the AI to identify whether each necessary provision is present. • The ‘output’ is a “1” or “0” (‘yes’ or ‘no’) for each provision. • After extracting all answers for each provision type, a simple formula in

Excel can be run to analyze whether all two thousand HIPAAs are valid or not.

• A task that would normally take several hours of opening/closing files by junior associates writing down unanalyzable notes, can be automated and analyzed in a fraction of the time and cost of the traditional method.

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Integrate Database to System for Automating Tasks: Managing Database, Automating Tasks

Reminders of important

trigger dates

Generate certain form documents

Flag items for generating checklists

Email reminders internally


Traditional Approach

Innovative Method

Speed? slow fast

Complete? not enough time yes

Analyzable data? no yes

Pricing? billable hour fixed (per policy)

Assessing the Innovative Method

By leveraging Legal AI, contract unstructured ‘text’ becomes ‘data’, for easier analysis, database management and compliance.


• Big law

• In-house resources

• Boutique or innovative solutions

Deciding when/how to use Prioritizing key problems/pain-points

1 2 3

Identifying low-hanging fruits for ‘innovative’ method

• Identify key documents/deals

• Prioritize risks based on urgency and magnitude

• Large volumes of similar contracts?

• How complex and specialized is the legal analysis?

PART 3 Perspectives from General Counsel

29

Best Practices from GC Perspective on Contract Compliance

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CONCLUDING REMARKS

• Why contract compliance matters

• How to address problem of mitigating risk

• Traditional vs. Innovative method/ pros/cons summary

• Take-home message: • think big-picture and long-term;

build automated, integrated systems.

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SPEAKER BIOGRAPHIES

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Christopher S. Harrison is the founder of Sterlington Legal Solutions. He is focused on innovation in law through the use ofprocess management, data analytics, and technology-enabled services. He is the author of Make the Deal: Negotiating Mergers & Acquisitions, which was published by Bloomberg. He teaches M&A at the NYU School of Law.

Richard (“Rick”) Canedo is a Partner & Director of A.I. at Sterlington Legal Solutions, where he applies artificial intelligence applications to legal services, such as life settlement diligence, M&A and NDAs. Rick’s also has experience in structured finance and securitizations.

Jamie Sklar is the General Counsel of Fiduciary Network, LLC. He is a corporate attorney with over 18 years of experience in managing mergers and acquisitions, private equity, fund formation and other complex transactions.

contract compliance trends: optimizing technology and outsourcing · 2019-12-01 · contract...

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