Other parts of this series:
As discussed in our first blog showcasing the journey of contract remediation, this second installment covers the first phase, contract discovery and analysis (see illustration below). As noted in our last blog, financial firms are dealing with continual demands to remediate terms in financial contracts due to pending regulatory change events such as the London Interbank Offered Rate (LIBOR) reform, Qualified Financial Contracts, Privacy regulations, and Regulation Best Interest. Therefore, firms should be able to efficiently discover and carefully analyze financial contracts to identify relevant contracts for remediation while also collectively measuring their risk exposure.
Out with the old, in with the new (Digitization)
Before a financial services firm can begin to make sense of their contracts, they have to digitize any paper contracts by scanning them via Optical Character Recognition technology (OCR). Once paper contracts have been securely sourced, scanned, converted to electronic images and their digital images stored, they are machine readable/searchable and centrally located in a database/central source.
Searching for needles in haystacks (Discovery)
The serious work begins during the document search process. Since financial contracts are now stored in a common database, they can be easily searched via database queries or better yet, by use of specialized document search/mining tools with key word searches based on Boolean logic (remember the library search techniques of old). To effectively utilize these tools, one needs to know what key terms to search. This may require access to key search term definitions, perhaps using a taxonomical approach with tiers. For example, with LIBOR contracts, key terms such as counterparty, product, contract maturity date, LIBOR language, LIBOR fallback provisions should be defined.
Contract remediation teams/lawyers and others can search for these key terms such as LIBOR and can also search by contract type (e.g. securitizations) and group related contracts for wholesale term replacement. Once these key terms have been tested by staff and are pulling the appropriate documents, these terms can be set in templates that can be programmed to run automatically in batches in a document search and extraction tool based on date ranges and other parameters or can be programmed to run in an internal database via machine learning scripts.
Once all the documents containing the key word terms have been isolated in the tool or database, the key terms can then be extracted. The applicable documents are pulled back (PDF format, Microsoft® Word, etc.) and the sections with references to the key terms are shown in a graphical user interface. The results can be Quality Assurance reviewed by staff or machines. The references to terms and related documents can then be catalogued and saved, downloaded to original formats of PDFs and/or “Word” for reference or the terms can be systematically revised across all relevant clauses/provisions in all documents by the use of a search and extraction tool.
For more efficient contact search and discovery, a front-end contract management tool should be leveraged by contract administrators and remediators.
Figure: Accenture Contract Remediation Lifecycle
Next up in the series: Assessing and amending contracts (Phase 2). In this next installment we will explore methods for how to effectively and efficiently assess and amend contracts through business logic applied to grouping contract types and routing to appropriate parties for review using a rules engine and technology tools. Stay Tuned!
How we can help
Accenture can assist clients in building out a Contract Lifecycle Management (CLM) program, offering support and leading capabilities in the following areas:
- Conducting current state assessments;
- Defining a target operating model for CLM process;
- Defining tools, business and technical requirements;
- CLM/doc management vendor selection;
- System integration; and
- Change management/training.
Contact us to get started on your contract remediation journey.
Visit our LIBOR offering page to learn how our solutions can help you transition from LIBOR with confidence.
Newsletter Contact Person: Lisa Bloomberg
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