Watson Discovery’s new NLP feature prepare enterprises for LIBOR transition

By | 3 minute read | December 4, 2019

As a business owner, shielding your company from risk is among your primary concerns. You want to make certain that your decisions are security minded, sound and based on the best available data. So, when a scandal erupts around the longest running global interest rate standard – the London Interbank Offered Rate, or LIBOR – things can get messy.

The end of LIBOR

If you take a look at any mortgage contract or student loan agreement created in the past 40 years, chances are that the interest rate you’re paying is tied to LIBOR. According to the New York Times, LIBOR underpins more than $350 trillion of financial products, making it one of the financial world’s most important numbers.

In 2012, financial regulators decided to shift away from the original LIBOR rate and began to set rules and guidelines to determine borrowing costs and interest rates in other ways. All governing documents tied to the LIBOR rate must be renegotiated and amended to tie interest rates to something else, like the Secure Overnight Financing rate (SOFR), which is based on government bonds. This is time-consuming and monotonous work that requires extreme attention to detail from bankers around the world.

LIBOR transition puts businesses at risk

The task, however, remains, and those who wish to stay secure must investigate their contracts to find out how the interest rates were set, determine whether they contain a fallback clause naming an alternative to LIBOR, and if not, slate those contracts for amendment. Experts estimate the end of LIBOR is a $350 trillion-dollar problem.

Watson NLP can prepare enterprises for the LIBOR transition

While developing Watson Discovery’s new features and capabilities, it came to the developer’s attention that Discovery’s market-leading AI search technology could be just the thing to combat this problem. Specifically, Discovery’s new Content Intelligence capability. Our leading AI enterprise search technology is now available on-premises, or on any private, public, hybrid of multi-cloud environment, and now that it’s been coupled with IBM’s Cloud Pak for Data integration it’s even easier to unlock Watson’s advanced data governance and integration capabilities and apply it to your data, no matter where it resides.

“With Content Intelligence, we are extracting data from contracts to make our audit process quicker, more efficient and more accurate.” – Adam Karasick, Senior Manager, EisnerAmper

Users of Discovery can now purchase, an add-on called Content Intelligence.

With Content Intelligence, users can skip document training and automatically configure Discovery projects using contracts, invoices, and purchase orders. This helpful feature is uniquely suited for organizations working in the general contract governance space, the procurement space, and to identify changes to contracts necessary for the LIBOR transition.

With Content Intelligence, Watson Discovery can understand all of the domain related content specific to solving LIBOR. The AI will have an understanding of contract clauses, assets, liabilities, and fallbacks which are concepts, that cannot be revealed in basic keyword search. Discovery’s prebuilt custom models start with LIBOR but can be expanded to include other specific interest rates. At its heart, every financial instrument is a contract, to lack contract understanding is to open your organization to unforeseen risk.

Content Intelligence Success Stories

“Where it took contract review professionals 2-4 hours, Watson Content Intelligence can do it in under 2 minutes” – Jason Juliano, CEO of Aponia

Alongside their business partner Aponia Data, EisnerAmper, one of the US’ largest full-service advisory and accounting firms, is streamlining their contract review process using Watson Discovery Content Intelligence. Typically auditing involves combing through thousands of complex legal documents to pull out pertinent information. A process which takes a significant amount of time and effort–time and effort that could be better spent on more strategic work.

Watson Discovery’s Content Intelligence was built to understand both the structure and meaning of contracts, giving accountant the ability to analyze governing documents faster and with greater accuracy. Where it once took contract review professionals 2 – 4 hours to complete a single contract, Watson Discovery Content Intelligence can do it in under 2 minutes.