Contract Management in the AI Era: Transforming Your Approach

Understanding the Importance of Effective Contract Management

Effective contract management is crucial for commercial success. Yet, many organisations still view contracts as mere administrative documents. According to a 2025 research guide, poor contract management leads to an average value erosion of 8.6%. This figure has only slightly improved from 9.2% in 2014. Leading companies achieve value erosion rates as low as 3%, while underperformers can see rates exceeding 20%.

With AI transforming how contracts are created, negotiated, and managed, organisations have a unique opportunity to turn contracts into strategic assets. This post explores current trends and offers strategies to leverage AI for better risk management and value creation.

Key Trends in Contract Management

Growth of CLM and AI Adoption

The global contract lifecycle management (CLM) market is projected to reach $12 billion by 2025, growing at an annual rate of 12–15%. Around 78% of organisations have invested in CLM over the past five years. AI-powered tools are gaining traction, automating drafting, extraction, and negotiation processes.

Fragmented Data and Complexity

On average, contract data is scattered across 24 different systems. This fragmentation leads to inefficiency, increased risk, and missed opportunities.

Standardisation and Templates

A significant 84% of organisations expect globally standardised contract templates by 2025. This standardisation aims to reduce complexity and ensure compliance across the board.

Workforce Involvement

Approximately 26% of the workforce is involved in contracting processes. This statistic highlights the broad impact of contract management across various departments.

Strategies for Harnessing AI and Improving Contract Outcomes

1. Implement AI-Native CLM Platforms

Using generative AI can revolutionise contract drafting. It can draft clauses, identify risky language, and suggest alternative terms. AI can also extract key obligations, renewal dates, and payment terms from legacy contracts. This reduces human error and speeds up reviews.

Ensure that AI models are trained on high-quality legal data. Include guardrails to prevent hallucinations or biased outputs.

2. Centralise Contract Data and Standardise Templates

Consolidate all documents into a single, searchable repository. Use AI to categorise contracts and map obligations effectively.

Develop standard templates with pre-approved clauses and fallback positions. Standardisation reduces negotiation time and enforces compliance, addressing the expectation for globally standardised templates.

3. Integrate Risk Scoring and Alerts

Apply AI-driven risk scoring to contracts. Consider factors like counterparty risk, jurisdiction, indemnities, and termination clauses. Automated alerts for high-risk contracts enable early intervention.

Link contract data to enterprise risk management systems. This allows for real-time monitoring of exposures.

4. Enhance Collaboration and Workflow Automation

Utilise CLM tools to create transparent workflows. This enables legal, procurement, finance, and sales teams to collaborate seamlessly. Automation reduces manual tasks, allowing the 26% of the workforce involved in contracting to focus on high-value activities.

5. Leverage Analytics for Continuous Improvement

Analyse contract lifecycle metrics to identify bottlenecks and benchmark performance. Track value leakage and measure improvements as AI tools are adopted.

Use insights to refine clause libraries, negotiation strategies, and supplier performance assessments.

The Future of Contract Management

As we move further into the AI era, the landscape of contract management will continue to evolve. Embracing these changes is essential for organisations aiming to stay competitive. By adopting AI-powered CLM platforms and data-driven insights, companies can significantly reduce value erosion, accelerate deals, and improve compliance.

Conclusion

Contract management is transitioning from an administrative burden to a strategic capability. With AI-powered CLM platforms and data-driven insights, organisations can reduce value erosion, accelerate deals, and improve compliance. By centralising contract data, standardising templates, and integrating risk analytics, companies can transform contracts into sources of competitive advantage.

Levine, J. (2025) Contract Management Statistics & Trends 2025: The Complete Resource Guide. ContractPodAI, 21 August. Available at: https://contractpodai.com/news/contract-management-statistics-trends/ (Accessed: 5 September 2025).