By 2028, 60% of governments worldwide will adopt a risk management approach in framing their AI and generative AI policies
Significant financial penalties, litigation, and reputational damage can erode revenue and threaten a company’s long-term stability and growth
By integrating data across thousands of contracts, AI empowers decision-makers with visibility into business outcomes tied to revenue, savings, and risk
The regulatory environment is moving at breakneck speed. In sectors like tech and finance, where governments are trying to stay ahead of technological advancements and emerging risks, the problem is especially pronounced.
AI is a prime example of how technology is shaping the regulatory landscape. In fact, a recent analyst study predicts that by 2028, 60% of governments worldwide will adopt a risk management approach in framing their AI and generative AI policies.
AI is just one facet of regulatory compliance that is driving change for today’s businesses. New and existing regulations impact many areas of commerce – employment, environmental, social, and governance (ESG) commitments, international and domestic trade, and financial operations, to name a few. Complicating matters further, regulations often vary across borders, trade blocs, and even languages.
While regulation is imperative, it also creates huge compliance challenges that, if not properly managed, could have significant financial consequences for enterprises.
But there’s hope on the horizon.
Impact Of Fast-Moving Regulations
To avoid negative financial consequences, business leaders must understand what’s at stake with non-compliance. Significant financial penalties, litigation, and reputational damage can erode revenue and threaten a company’s long-term stability and growth.
For instance, the EU’s AI Act, a first-of-its-kind legislation, came into force across 27 member states in August. It emphasises monitoring the regulatory compliance of companies and their responsible use of AI.
Failure to comply could result in fines at varying levels, depending on the severity of the violation and the company’s size. For example, non-compliance with high-risk AI systems could lead to fines of up to 7% of a company’s annual turnover or a maximum of 35 Mn EUR, whichever is greater.
Every relationship across the business ecosystem – whether with customers, partners or suppliers – represents a potential weak spot. But where there’s a business relationship, there’s also a contract and an opportunity to enforce regulatory standards. This makes contracts one of the most valuable resources in today’s environment, serving as the foundation for every great compliance strategy.
The ability to derive insights from contract data, gain visibility into potential risks, and drive contract performance is essential to ensure that regulations are met while protecting the bottom line. However, this is easier said than done, particularly when you have limited resources and time.
AI Is Transforming Contracting
AI isn’t just the technology being regulated – interestingly, it’s also the tool that can help businesses comply with stringent and complex regulations globally. Beyond AI regulation, GenAI, in particular, can streamline compliance across various regulatory landscapes, reducing risk and enhancing efficiency. By integrating data across thousands of contracts, AI empowers decision-makers with visibility into business outcomes tied to revenue, savings, and risk.
Whatever the regulation, AI-powered contracting solutions can extract obligations at scale to help businesses improve the transparency of their relationships and ensure that regulatory compliance clauses are fully realized and adhered to. And it does not stop there – with powerful GenAI-driven agentic frameworks that are evolving quickly, these solutions can also verify that those obligations are met in the normal course of business.
With critical information about business relationships at their fingertips, all leaders – from CFOs, and CPOs to general counsels – are better equipped to set their strategy in this rapidly shifting regulatory environment.
Automating Compliance
Implementing AI-driven solutions offers substantial benefits. With full visibility into contracts across the enterprise, teams can easily identify potential areas of non-compliance and continually monitor relationships to detect unauthorised terms and regulatory violations.
When new regulations are passed, business leaders can automatically pinpoint which business relationships are no longer compliant. For example, AI can assess risk during the negotiation process and ensure critical clauses are not overlooked when new contracts are signed.
AI can also suggest compliant language to optimise the contract, ultimately streamlining reviews while protecting the organisation. This enables legal teams to focus resources on negotiating high-risk agreements that require closer review, rather than touching every contract.
With agentic frameworks and more “thoughtful” large language models (LLMs) like OpenAI’s o1, it is now possible to analyse whether the transactions that result from these business relationships are compliant with the language and obligations in the contract. This adds tremendous value to the 70% value chain of the contract – the life of the contract beyond the negotiation and execution.
Compliance As A Driver Of Financial Stability
With AI as a partner in the regulatory arena, business leaders can focus on what matters most – saving money and driving revenue.
Contracts are the bedrock of business. But they can be a forgotten asset. AI in contracting ensures the full intent of every business relationship is realised in the real world, bringing potential cost- saving and revenue opportunities to the surface that might otherwise be overlooked.
Contract Intelligence finds value in agreements immediately and then enables continual performance across relationships well into the future, safeguarding your company’s financial health by preventing unwanted revenue leakage that eats away at cash flow and undermines the balance sheet.
Now that’s the sort of AI that everyone can get behind.
