Contracts form the foundation of third-party outsourcing, defining obligations, risks, and rights between suppliers, partners, and customers. They serve as the official source of truth and play a crucial role in managing business relationships.
Yet, despite their importance, contract management; especially at scale, remains a significant challenge for legal, procurement, supplier, and compliance teams. Research from McKinsey & Company indicates that inefficient contract management can cost businesses up to 9% of their total annual revenue due to missed obligations and compliance failures. Similarly, World Commerce & Contracting reports that poor contract processes lead to a 38% increase in project delays and legal disputes.
A challenge that stems from Contract Management is clause analytics, the process of identifying and analysing key contract clauses related to compliance, supplier risks, or regulatory changes. Traditionally, this requires manually reviewing documents, running basic keyword searches (e.g., Ctrl+F), and tracking findings in spreadsheets. Not only is this process slow and resource-intensive, but it also increases the risk of errors, omissions, and inconsistencies.
What is Clause Analytics, and Why Does It Matter?
Clause analytics is a process organisations use to extract and assess specific legal terms in contracts, such as compliance requirements, risk clauses, and obligations outlined in Master Service Agreements (MSAs) or supplier agreements. However, manually searching hundreds or thousands of documents is inefficient and unsustainable, particularly when regulatory updates or supplier risks emerge.
This is where automated contract analytics changes the game. By leveraging intelligent search capabilities, businesses ditch manual search processes and use a digital tool to instantly identify risky clauses, outdated terms, and compliance gaps; saving hours of work and significantly reducing risk exposure.
What the Manual Search Method Falls Short
Currently, companies use manual methods to search for clauses. This process can fall short for multiple reasons from being resource intensive, prone to error and more. 4 main reasons for ditching the manual method for clause analytics are:
- Contracts often span hundreds of pages, making manual clause identification cumbersome and slow. Through manual search, you can only search one document at a time, which is extremely resource-intensive for a large enterprise company that has thousands of suppliers.
- Basic keyword searches miss nuanced legal language and variations of terms and do not allow for Reg X search processes (e.g., “termination clause” vs. “contract dissolution”).
- Tracking compliance across multiple agreements is challenging, especially for businesses operating across jurisdictions with varying legal frameworks.
- Supplier contracts often reference subcontractors or third-party technologies, creating hidden risks that are difficult to surface without structured analysis.
Using a Digital Tool for Contract Clause Analytics
Cross-Contract Clause Analytics leverages automation to scan multiple contracts simultaneously, pinpointing relevant clauses based on predefined criteria. Advanced features such as section-based filtering, topic categorisation, and Regular Expressions (RegEx) enable organisations to extract and analyse contractual obligations with precision.
So why do you need a digital tool? Here are the 5 benefits of using a digital tool that has a cross-contract analytics capability for your clause search.
1. Regulatory Compliance & Legislative Changes
When new laws or regulations come into effect, organisations need to assess their contractual exposure quickly. Automated analytics allow businesses to:
- Identify all contracts referencing specific regulatory terms.
- Determine compliance obligations and assess potential risks.
- React proactively to legislative changes by adapting contractual language.
Example: If your company was looking to expand into the EU needs to ensure that all supplier contracts comply with the Digital Operational Resilience Act (DORA). Clause analytics can instantly extract all agreements mentioning DORA-related obligations, saving weeks of manual review.
2. Supplier & Risk Management
Ensuring supply chain resilience requires visibility into supplier dependencies and risk factors. Contract Clause Analytics enables organisations to:
- Identify contracts that mention third-party technologies, subcontractors, or exclusivity clauses.
- Proactively assess risks like vendor lock-in or reliance on vulnerable suppliers.
Example: Businesses can search contracts for clauses mentioning sub-suppliers or cloud service dependencies to mitigate potential vulnerabilities such as when the CrowdStrike cybersecurity global IT outage occurred.
3. Efficient Due Diligence & Audits
During mergers, acquisitions, or audits, legal teams must assess contract terms quickly and accurately. Automated analytics simplify due diligence by:
- Locating termination clauses, indemnity provisions, and audit rights across all contracts.
- Ensuring compliance with data processing agreements (DPA) and regulatory requirements.
Example: A financial institution undergoing an audit can instantly retrieve all contracts that specify audit rights and compliance obligations, reducing audit preparation time from weeks to hours.
4. Enhanced Search Capabilities
Manually searching for clauses across contracts is inefficient, especially when dealing with variations of terms. Advanced search features provide:
- Topic-based and contextual search capabilities.
- The ability to scan for multiple term variations (e.g., “UK,” “United Kingdom,” specific cities or regions).
- Improved accuracy over simple keyword searches.
Example: A global firm reviewing Brexit-related impacts can scan all contracts for mentions of “UK,” “EU,” and specific jurisdictions, ensuring no relevant clauses are overlooked.
5. Time & Cost Savings
Automating clause analytics leads to significant efficiency gains:
- Legal and procurement teams save hundreds of hours per year on contract reviews.
- Faster decision-making enables businesses to react promptly to risks and opportunities.
- Reduction in legal disputes due to improved contract visibility and compliance tracking.
See it in Action: Cross-Contract Clause Analytics
The Brooklyn platform is a post-contract management platform that helps to digitise and optimise your contract management processes. Brooklyn’s Automated Contract Clause Analytics equips businesses with the tools to proactively manage risk, ensure compliance, and save valuable time.
To understand how contract clause analytics can transform compliance and risk management, watch the demo below showcasing The Brooklyn Platform
