It is anticipated that the business landscape is ready for growth as we move out of the first quarter of 2021. In addition to the anticipated opportunity, many businesses are considering how to address long-term challenges and achieve sustainability.
In January 2021, EY published a report on a research titled "How do you turn barriers into building blocks?" which was drawn from interviews with more than 2,000 leaders from 17 industries and 22 countries across the globe. The survey focused on law department operations (including talent, data, technology and sourcing), contract creation and corporate secretarial operations supporting legal entity compliance.
The research result extensively captured the transformation of law departments from the perspectives of both General Counsel and other business leaders. Five key priorities for in-house lawyers stood out from the research.
Our firm, LC Lawyers LLP, as a Hong Kong law firm member of the EY global network, is reporting the research in this article.
Priority 1: Transform risk management
CEOs named “risk management” as the area they expected to implement the most change over the next three years. They would like their organizations to take a more data-driven approach, so that the increased access to data can help them to better identify, quantity and manage risks.
However, General Counsel expressed mixed views.
The above suggests a clear gap in legal process management and under-use of technology.
Priority 2: Re-evaluate the law department and cost structure
If law departments are determined to save costs, they have to make changes in how they operate.
Priority 3: Digitize processes
It is certain that technology will play a very important role in the ongoing transformation of businesses, but this may not be happening in legal departments to the extent required.
To persuade the top management to invest in legal technology, the General Counsel needs a convincing investment case, supported by data, that legal technology can increase efficiency, enable sophisticated risk management, and more support the company’s strategy.
Priority 4: Enable the business to grow
Although most CEOs did not expect their businesses to expand this year, it is vital that every part of the organization (including legal and procurement departments) strengthens revenue generators.
There is significant room for the legal and contracting functions to deploy new ways to improve efficiency.
Priority 5: Deliver legal functions in a different way
Many companies benefited from the use of external lawyers, but the fees paid to them consumed a large part of the law departments’ budgets. Most General Counsel believed reducing the number of outside legal advisers could save some costs. Nevertheless, such strategy is unlikely to help legal departments’ other priorities relating to risk management, digitization and business growth.
Shifting work internally can reduce spending on external lawyers, and also offer more integration with the other business functions. This need was amplified by the increasing workloads in legal departments which outpaced budgets.
To optimize legal functions, General Counsel will need to turn to technology and process improvement. Yet, in-house lawyers spent too much time in selecting technology solutions and implement them cross-the-board.
What is next?
Apart from the traditional internal realignment of work and use of external counsel, the other common strategies of delivering legal functions are:
Interviews with leaders from law, procurement, commercial contracting and other departments suggest change is already underway in most legal functions. Expanding these initiatives and maximizing their effectiveness will be the primary challenge for General Counsel in 2021 and beyond. Law departments’ success in this area will ultimately help them to align with the overall business strategy, transform risk management and enhance growth in their organizations.