Digital transformation in banking and capital
markets transactions is increasingly extending to legal documentation. An area
seen by some, probably unfairly, as one of the last bastions resisting the
onset of workflow automation. However, to the wise, complex transactions potentially
involving many separate internal functions and external parties cannot continue
to be manually processed.
The golden opportunity for the legal function lies in the digital
extraction and utilisation of data that can be automatically structured in a
way that allows it to be auto-transferred and placed in related and future
documents. The benefit therefore is that an automated process, leveraging
technologies such as; AI etc. can boost efficiency, cut costs and help drive
Banking legal workflows, as we know it.
Let’s face it, and many of us have probably done
the same thing before. Somebody needs a complex document on a specific topic.
What do you do? Faced with either: a) start with a blank sheet, b) google
something similar and use that as a starting point or c) modify a previous
similar document that you have on file… most of us would take option c and if
that fails, option b. It is hardly surprising therefore that most initial
drafts of legal documents are prepared by hand generally consuming many hours
of detailed and focused effort.
This is not all. The process to negotiate legal
terms and contracts, plus the ongoing transaction management is generally
conducted by phone calls, un-tracked e-mails or even face-to-face (probably
un-recorded) meetings. When viewed in this way, as a; manually intensive, laborious,
probably expensive and potentially risky workflow, it is not surprising that
astute legal leaders, when seeing the digital transformation happening around
them have opted to investigate change.
Banking legal workflows, as they can be.
The hypothesis is this. If document generation and
workflow automation software can handle banking transactions, then it can
handle the ‘legals’ that exist as part of that. In fact, when you think about
the key advantages that these systems bring, the argument is even stronger:
- Controlled and consistent processes, especially those that monitor
change history and mandate the correct approvals are far better at managing
- Automated processes drive consistency, efficiency and save cost.
- Software brings the benefits of better storage and retrieval, which is
vital for legal documentation.
- Intelligent systems incorporate monitoring and reporting functionality;
aiding decision making, flagging errors and driving continual improvement.
A diagram of the generic process flow is summarised
The key to automation of legal workflows is the effective application of structured data.
This is data that is held in a defined ‘structure’ (or framework) that makes it;
readable, usable and therefore capable of interpretation by a machine.
Again a simple analogy is to ask yourself, how many
times do you ‘copy and paste’ or how long to you spend transforming a mess of
data into something you can work with? We would all agree that if data were to
be structured first time (at source) then life would be so much easier.
Now, here is the clever part! When the data is
structured. Machines can be programmed to read documents and extract that data
saving the legacy ‘copy and paste’ effort and enabling a flow of data for other
uses. Capmatix, the software solution from LPA uses AI/OCR (Artificial Intelligence /
Optical Character Recognition) to automate data extraction.
Furthermore, when a bank of structured data is
built up, AI / machine learning can recognise trends and patterns deriving
predictive insights that could have been missed. For example, imagine the
ability to identify patterns in counterparty behavioural response to certain
legal document types or elements of documents. Predictive analytics could
indicate optimal courses of action.
Whilst that may be the sexy part, the true value of
workflow automation and document generation software such as the Legal
Document Navigation tool is the
more everyday process of; drafting, emailing, dispatching and filing. All of
which can be automated and tracked maintaining a full audit trail. Not only are
changes tracked, but approvals can be set to only pass when the correct
permissions are granted. Considering the multiple changes that occur at
different stages and natural human fallibility, systemising and recording all
changes (what change, who made it, who approved it, when and why) enables solid
decision making and helps to improve efficiency in the process to arrive at an
agreed legal document.
screen below shows the progress status of the various contract approvals in a
Example product / agreement agnostic
applications of LPA Legal
- Cash / Loans
- KYC process
working with an investment bank, one branch was processing over 60 CSAs (Credit
Support Annexes) a month. Each one involved negotiations with six separate
internal departments, including; trading and front office, collateral
management, risk, compliance etc. With over 50 data points plus fall-back
clauses creating each CSA, the task had become concerning. By implementing a
solution with LPA the bank
were able to harmonise inter-departmental and client negotiations thus saving
time and increasing efficiency and output. Regulatory compliance could be
ensured and the whole process was combined within one platform.
An example of a user screen summarising the key
status on in progress contracts is shown below:
To learn more
about the Capmatix Legal Document Navigator software tool from LPA, you can
request a demo here.