AI Integrated Contract Risk Assessment for Energy Procurement

AI-Powered Contract Risk Assessment for Energy Procurement

1. Initial Contract Review

1.1 Document Upload

Procurement team uploads the contract documents into the AI-powered legal tool.

1.2 Optical Character Recognition (OCR)

The AI tool utilizes OCR technology to convert scanned documents into machine-readable text.

2. Risk Identification

2.1 Natural Language Processing (NLP)

AI algorithms analyze the text to identify potential risks, such as unfavorable clauses or compliance issues.

Example Tools:

• LegalSifter – for clause identification and risk assessment.
• Kira Systems – to extract and analyze contract data.

2.2 Risk Scoring

The AI system assigns a risk score to each identified issue based on historical data and predefined criteria.

3. Risk Analysis

3.1 Comparative Analysis

The AI tool compares the contract against a database of similar contracts to assess risk levels.

Example Tools:

• LexCheck – for benchmarking against industry standards.
• Clausehound – for access to a library of contract templates and clauses.

3.2 Predictive Analytics

Using machine learning, the tool predicts potential future risks based on current contract terms and market trends.

4. Recommendations Generation

4.1 Suggested Amendments

The AI tool generates recommendations for mitigating identified risks, including suggested amendments to contract language.

4.2 Expert Review

Legal experts review AI-generated recommendations to ensure compliance and appropriateness before finalizing edits.

5. Finalization and Approval

5.1 Contract Revision

The procurement team incorporates the recommended changes into the contract document.

5.2 Approval Workflow

The revised contract is routed through the approval workflow, ensuring all stakeholders review and approve the changes.

6. Post-Implementation Monitoring

6.1 Contract Performance Tracking

AI tools monitor contract performance against KPIs and alert teams to any deviations or issues.

Example Tools:

• Agiloft – for contract lifecycle management and performance tracking.
• Ironclad – for ongoing contract compliance management.

6.2 Continuous Learning

The AI system updates its algorithms based on new data and outcomes to improve future risk assessments.

7. Reporting and Analysis

7.1 Risk Assessment Reports

Generate comprehensive reports detailing identified risks, amendments made, and performance metrics.

7.2 Stakeholder Presentation

Present findings and recommendations to stakeholders for ongoing improvement in contract management practices.