The legal landscape is changing due to artificial intelligence (AI) as I am writing this article. The role of AI in legal risk management will change how a lawyer assists their clients in identifying, assessing, and mitigating legal risks. This article will focus on the intersection of AI and legal risk management, exploring the potential benefits of enhancing decision-making, streamlining compliance, and safeguarding an organization’s exposure to litigation.
Some areas where AI can improve legal risk management assessments include governance, risk, and compliance programs, educating corporate boards on the rapidly evolving field of legal compliance, developing a risk management strategy, claims management, contract management and legal AI.
Governance, Risk & Compliance Programs
AI has an important role in corporations’ governance, risk management, and compliance efforts, especially around fraud detection and protection. Governance, risk management, and compliance (GRC) software platforms have been used for years and are vital tools almost all compliance and risk departments use. Incorporating AI in these existing software platforms offers the potential for improving the detection of risk, audit, control deficiencies, identifying patterns, and prioritization of risk assessments.
Many organizations, not just financial institutions, must be on the lookout for fraud. AI tools can suggest suspicious transactions and logins, and detect patterns for humans to analyze and verify if the fraud is real. Just as important, humans can train the AI to alert or reject similar future transactions. The fraudsters are constantly changing their ways to work around an organization’s fraud detection barriers and AI is a new tool for organizations to use to combat this risk.
AI Risk Management for Corporate Boards
Board Directors must continually educate themselves on the rapidly evolving laws and regulations governing not only AI but all areas of the law to ensure compliance. AI will give them the capability to stay up to date and track new legislation, regulations, and case law on multiple and various topics that expose the company to litigation. Board Directors must also continually educate themselves on the demands of their clients or consumers on the existing operations of their organization. Incorporating AI into a corporate board’s existing method of governance will offer the potential for improvements in data analysis, cybersecurity, compliance, and regulatory monitoring, board meeting insights and patterns, strategic planning, risk management, diversity and inclusion, and customer insights.
AI for Risk Management Strategy
Analyzing data to develop and manage a risk management strategy is very cumbersome. Current software platforms have assisted organizations for years in analyzing volumes of data to strategically develop a plan for risk management. Incorporating AI into these already existing software platforms will enhance and expedite the process, mainly for AI’s ability to analyze large volumes of data at greater speeds. Rest assured, additional data regulations for AI and otherwise are on the horizon. AI can improve on an organization’s current method of developing and managing these new regulations and the risk involved.
Multiple products in the market today are incorporating AI into their case management software, driving better outcomes for businesses and their insurance companies. These software systems are achieving better outcomes for claim assessment and proactively and automatically monitoring changes in risk, reducing their duration and cost. The software also preserves your business’s institutional knowledge to increase automation. The software improves profitability by reducing (improving) loss ratios and helps corporate counsel make quicker risk assessments.
Any lawyer who has reviewed contracts for an organization knows the painstaking time it takes to get through a multi-page contract with endless boilerplate paragraphs looking for the smallest deviation of the norm. After spending hours reading and interpreting the repetitive and boring verbiage in contracts, lawyers (humans) often make errors. AI legal risk management software can spot risky language in contracts, discover terms that are omitted, and identify any deviations in the standard boilerplate language. An organization can make more informed, strategic risk management decisions about contract risks with these AI legal risk management tools. AI can scan and rapidly identify and, compare, and contrast clauses to the organization’s preferred language or templates. These tools can help procurement officers, contract managers, risk managers, or legal professionals determine how to modify the contract terms to align them with the organization’s goals.
Legal AI can help lawyers deliver faster and more efficient work in their practice. It can assist with the challenging tasks of drafting and maintaining internal documents and policies, contract review, document review, and much more. Corporate counsel can now streamline repetitive tasks freeing their time for advising clients for better business outcomes.
AI Creates Its Own Risk for an Organization
AI itself, actually creates a new type of risk for an organization. If left unchecked, it has the potential to produce false responses. See MSBA Blogs, “NY Lawyers and Law Firm Sanctioned for Citing Fake Cases Derived from AI,” and “Is Skynet near?” AI also has the potential to harm organizations and people by perpetuating biases, exposing an organization to greater cybersecurity threats and potential intellectual property violations. There is a possibility that AI poses threats that have not been discovered yet. There is no doubt that AI can benefit organizations by enhancing efficiency. But remember, AI is only as accurate and unbiased as the data it is trained on. Humans are still needed to verify AI queries and responses.
Don’t Leave the Humans Out of the Legal Risk Management Picture!
AI has and will continue to change the landscape of legal risk management, offering insights and efficiencies to businesses and legal professionals. Assistance with streamlining compliance processes and enhancing decision-making more than makes up for the additional risk of using AI in an organization. It not only reduces manual and mundane tasks, freeing time for employees to perform other tasks, but it ultimately gives an organization better protection from potential liability. Of course, human oversight of any and all AI systems is of paramount importance to ensure that the implementation of AI is done ethically and accurately. Don’t leave the humans out of the legal risk management picture!