Organisations are supposedly “neglecting” artificial intelligence (AI) adoption and, according to a new report by Icertis, it’s hurting their contract negotiation performance. Costly contract mistakes are a widespread pain point that the majority of C-suite executives believe can be solved with AI.
A new survey of C-Level executives by AI contract management tool provider Icertis found that as many as 90% of CEOs and 80% of CFOs are failing to negotiate contracts effectively. This major oversight is, Icertis claims, leaving millions of pounds on the table. It represents “vast amounts of money” that could be recouped with better pre-signature contract negotiations.
Everything runs on contracts
Contracts define every business relationship and form the foundation of global commerce. In the current financial climate, every pound counts. Icertis’ report argues that contract mismanagement is a key pain point for organisations looking to prevent revenue losses. The report surveys 1,000 c-suite executives to illuminate how contract inefficiencies are causing severe revenue leakage within organisations. Industry experts have called the digital transformation of conteact management the next frontier for the procurement industry.
70% of CFOs stated that most revenue loss occurs from rising costs in their contracts due to inflation adjustments. These adjustments have largely gone unchecked or ignored in contract reviews. Also, a further 30% of business leaders point to revenue loss from unchecked auto-renewals.
Both issues which could be easily captured through AI-driven contract monitoring.
Icertis: “AI is being overlooked”
Despite being complex, Icertis argues that AI-driven contract monitoring is now capable of capturing the reoccurring issues associated with contract value leakage. However the report also shows that CEOs are underestimating the role AI can play in addressing costly contract gaps within their legal departments – the hub for contract negotiations and agreement management across the enterprise.
When asked where AI would deliver the most business value by 2025, the legal function (23%) was ranked last. It came in behind finance (47%), marketing (46%), sales (35%), and several other business units. Icertis argues that the ranking indicates that many leaders are overlooking the transformative potential of AI in mitigating legal inefficiencies and boosting profitability.
“Millions of dollars flow in and out of the enterprise through commercial agreements with customers and suppliers. This survey from Icertis proves that c-suite leaders lack confidence when it comes to optimising those agreements and are unknowingly overlooking critical areas of value leakage in their business relationships,” said Rajat Bahri, Chief Financial Officer at Icertis. “Executives in all industries want to increase revenue and improve profit margins in 2025, no matter what the economic landscape looks like. Turning contracts into strategic assets with the right AI technology is key to recapture revenue and ultimately get ahead as global commerce continues to evolve.”
Other Key Report Findings Include:
- CFOs are turning a blind eye to value leakage. CFOs cite late or outstanding customer payments, unused discount opportunities with suppliers among the top five sources of revenue leakage.
- Overconfidence is the biggest threat to regulatory compliance. 70% of c-suite leaders feel “very prepared” to demonstrate compliance in 2025’s rapidly shifting regulatory landscape. However, nearly half (44%) of businesses were fined for regulatory violations in the last five years.
- AI will trump macro-economic factors in shaping the 2035 business landscape. Executives believe advancements in AI will have the biggest effect on how their business evolves in the next 10 years. That’s even more of an impact than climate change, increased market competition, geopolitical shifts, and evolving supply chains.
The research findings serve as a call to action for business leaders. Icertis argues that they need to urgently need to rethink how AI could play a vital role in contract management. AI can prevent costly errors and ensure more efficient negotiations throuh automated monitoring, inflation adjustments, and real-time insights.
Going forward, businesses will continue to face economic pressures. However, Icertis argues that those that adopt AI to tackle contract inefficiencies will likely see significant reductions in revenue leakage and unnecessary expenditures in the years to come.
