IBOR: A New Frontier for Digital Contract Management

As everyone knows by now, with the demise of LIBOR and other IBORs, insurance companies, banks, and a wide range of other financial institutions are faced with identifying, reviewing, and remediating all active contracts that reference an IBOR rate. Many that have begun this process are learning that the process is much less daunting if those instruments are centralized in a digital contract management tool.

Digital contract management tools are software products that locate, track, analyze and change contracts. In the past, they were little more than databases that organized contracts in a central location. Modern contract management tools have incorporated artificial intelligence, allowing them to perform advanced searches and analytics on a repository of contracts.

In the IBOR transition context, companies likely will confront several challenges, including:

(1)   Identifying and collecting all potentially affected contracts in the company’s electronic file systems and hardcopy records,

(2)   Isolating specific contracts in need of remediation,

(3)   Identifying IBOR-referencing provisions within the contracts and implementing fallback language (repapering), and

(4)   Renegotiating the agreements with counterparties and executing the amendments.

Veterans of modern litigation will recognize the first two challenges: litigators find, collect and review documents in discovery all the time. Traditionally, litigators have done so with help from commonplace e-discovery tools such as Relativity and Brainspace.

But the latter two challenges present workflows not typically encountered in litigation. And while traditional discovery tools may still be useful, companies should consider leveraging contract-specific tools as well, such as Seal.

Digital contract management tools underpin custom workflows that automate and streamline projects, such as identifying contracts containing clauses with IBOR references and helping to repaper those provisions. Without such tools, companies are faced with a much more manual, lengthy and costly scenario. For companies with large numbers of these contracts, a digital contract management tool may be worth the investment.

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