3 Jun 2021 | Charalambos G. Prountzos
Legal departments face rising tide of challenges in their transformation efforts, EY Law and Harvard Law School Center on the Legal Profession survey finds
Legal departments across the globe are facing a mounting list of operational challenges as they look to transform in the wake of complex digital and regulatory change, according to the 2021 EY Law Survey, which was conducted in collaboration with the Harvard Law School Center on the Legal Profession. The results come as workloads are expected to rise by 25% over the next three years, with anxieties surrounding revenue growth, cost cutting and difficulties securing C-suite support for investment in data and technology cited as key concerns impacting their transformation efforts.
More than 2,000 business leaders were interviewed during the first two months of 2021 – including more than 1,000 law department leaders from businesses representing 17 industries across 22 countries.
Risk management is a top priority, but confidence levels are low
The survey shows that a large proportion of General Counsel lack confidence in their department’s ability to identify, measure and handle the complex risks facing their organizations. Almost two-thirds (65%) say they do not have the data and technology to respond to a data breach. More than three-quarters (78%) say they do not systemically track contractual obligations, and 68% note that they do not have access to accurate, up-to-date information on their legal entities.
Mounting operational and budget pressures
The economic challenges of the past year have added to mounting pressures on budgets – and there has been a steep rise in the cost savings that General Counsel are looking to target. A significant majority (88%) of General Counsel are planning to reduce the overall cost of their legal functions over the next three years, driven mainly by pressure from the CEO and board.
Technological deficits and contracting inefficiencies
The report finds that more than half (59%) of General Counsel believe that greater use of technology is a way to reduce costs. However, only 50% of law departments have increased the use of technology over the past 12 months, and only 30% of in-house counsel say they have the technology required to do their job. More than eight in ten (83%) say they lack the skills needed to automate processes, while 41% report they lack the data and/or expertise to develop a case for investment into legal technology.
A lack of investment in technology is also impacting revenue growth. Almost all respondents (99%) say they do not have all the data and technology needed to optimize their contracting function. In addition, 97% say they face challenges securing budgets for investment in technology, with C-suite buy-in cited as the biggest contributory factor.
Transforming the legal function and enabling business growth
The wide-ranging challenges to transformation are compounded by rising volumes of work. General Counsel expect legal department workloads to increase by 25% over the next three years, but they anticipate a rise in headcount of just 3% over the same period. Also, three-quarters (75%) of legal departments say growth in workloads will outpace budgets with 87% saying they spend too much time on low-value, routine tasks. As employers fight to attract talent, almost half (47%) say that the increasing volume of low-value work has impacted employee morale.
A further critical challenge cited revolves around how law departments can act as enablers to the business. Little more than half (52%) of General Counsel believe their day-to-day work is aligned with the broader business strategy, and 57% of business development leaders note that inefficiencies in the contracting process have slowed revenue recognition. As law departments look to new and existing solutions, the survey also finds that there is a real appetite for co-sourcing strategies using alternative legal service providers, with 85% of General Counsel saying their department uses these services – up from 72% in 2019.
Charalambos Prountzos, EY Central, Eastern and Southeastern Europe & Central Asia (CESA) Law Leader and Managing Partner of the law firm ‘Prountzos & Prountzos LLC’, member of the global EY Law network, says: “As global economic recovery is gaining pace, and businesses focus once again on revenue growth, legal departments are faced with the combined challenge of increased regulatory pressure, growing workloads, digital change and the need to cut costs. EY Law globally is supporting General Counsel, legal departments and C-Suite executives in their legal function transformation efforts”.