The Importance of Ethical AI Partnerships in Vendor and Contract Management

Artificial intelligence in vendor and contract lifecycle management (VCLM) promises to transform how legal professionals handle agreements and work with their procurement colleagues to manage vendors.

Yet research from Cisco revealed that 27% of organisations have banned GenAI applications altogether - at least for now.

Vendor and contract management AI technologies promise to streamline complex tasks, enhance efficiency, and improve overall business performance, so why are people so cautious about adoption?

In this article, we take a look at:

• How AI is changing vendor and contract management
• The risks of using proprietary AI to manage sensitive data
• How businesses can choose the right AI-powered solution
• Why Gatekeeper partners with AI leaders

How is AI changing vendor and contract lifecycle management (VCLM)?

"In the context of VCLM, where vendor contracts contain sensitive commercial agreements and potentially personal data, the stakes for data privacy and ethical AI use are particularly high.

Organisations must ensure that AI solutions deployed for contract analysis, automation, and management adhere to stringent data protection standards, safeguarding the confidentiality and integrity of contract information.

This involves implementing robust security measures, encryption, access controls and ensuring that AI algorithms processing this data are transparent, fair, and free from biases." - Sam Pavitt, Head of Product, Gatekeeper

Using AI also sets the course for future corporate strategies that prioritise technological excellence alongside security, reliability, and ethical integrity.

Looking ahead, the focus will increasingly be on leveraging these advanced technologies to:

• Drive innovation
• Enhance operational efficiency
• Maintain a competitive edge

But, the application of AI can come with many risks. And with the recent explosion of proprietary tools, it’s more important than ever to be diligent about how and where your contracts are being managed.

What are the risks of AI in vendor and contract management?

While proprietary AI solutions promise customisation and efficiency, they also present a complex web of challenges that organisations must navigate carefully. These include:

• Data Security and Privacy: Robust protection against cyber threats is essential due to the sensitive nature of vendor and contract information. Major fears include potential breaches and unauthorized access, leading to data losses and reputational damage.
• Accuracy and Reliability: AI must accurately interpret complex legal language to avoid legal and financial repercussions. Errors in interpretation can result in mismanaged contracts and overlooked critical clauses.
• Compliance with Legal and Regulatory Requirements: AI systems must adhere to all relevant laws to avoid penalties and legal challenges. Continuous updates are necessary to comply with changing and new regulations, especially in industries with strict oversight.
• Transparency and Explainability: AI decision-making processes must be clear and understandable to maintain trust. Many AI systems operate as "black boxes", making it difficult to understand how decisions are made.
• Over-reliance on AI: Risk of reducing human oversight and losing critical human judgment. The balance between leveraging AI capabilities and maintaining human intervention is necessary.
• Ethical and Bias Concerns: AI systems can perpetuate existing biases present in the training data, leading to unfair practices. Ensuring AI systems are designed and trained to minimise bias and promote fairness is crucial.
• Reliance on Third-Party AI Vendors: Issues include vendor stability, data ownership, and long-term viability of AI solutions. Thorough due diligence is necessary to select reliable vendors with clear and favourable data ownership terms.

“The allure of tailor-made AI systems, designed to cater to the specific needs of an organisation, is undeniable. However, this path is fraught with potential pitfalls that could undermine long-term sustainability, innovation, and ethical standards. The use of proprietary AI to manage vendor and contract data necessitates rigorous scrutiny to ensure compliance with data protection regulations and standards such as DORA.” - Sam Pavitt, Head of Product, Gatekeeper

How to Choose the Right Software for Your Agreements

Implementing a CLM, VLM or VCLM software with AI features is as much about navigating strategic and ethical complexities as it is about embracing technological advancements.

Through massive investments in AI research and development, including Large Language Models (LLMs), companies such as AWS, Google, and Microsoft have established themselves as leaders in innovation and AI application.

The future of AI in VCLM lies in making strategic choices aligned with future-proofed technologies and ethical considerations.

Choosing a vendor and contract management software that partners with industry leaders is a must. That way, your business can have confidence in how secure the system is, the ethical handling of its data, and its ability to keep up with new AI developments.

“Organisations must weigh the short-term benefits of proprietary AI solutions against the long-term implications for their technological ecosystem, financial health, ethical standards, and regulatory compliance. As the AI landscape continues to evolve, fostering an environment that prioritises openness, flexibility, and ethical responsibility will be crucial in unlocking the full potential of AI technologies.” - Sam Pavitt, Head of Product, Gatekeeper

Why Gatekeeper Partners with AI Leaders

Gatekeeper recognises the potential for AI to enhance efficiency, accuracy and decision-making.

We have partnered with industry leaders, including Microsoft, to provide customers with the most innovative and secure AI vendor and contract management solutions. That's because we are committed to implementing AI advancement responsibly, prioritising ethical standards and your data privacy.

We are also committed to staying ahead of regulatory changes and actively participating in shaping policies that support innovation. Your vendor and contract data is always protected within Gatekeeper.

To find out more about how AI can benefit your organisation, read Navigating the Rapidly Evolving AI Terrain in Vendor and Contract Lifecycle Management.