Without question, this millennium has been marked by continual change. The Y2K scare; the dot-com bubble bursting; the telecom meltdown; the financial and housing equity crisis of 2008, and the ensuing Great Recession —and, more recently, the COVID-19 (coronavirus) pandemic — have all changed the way legal professionals work. What is more, the regulatory environment has been in a state of transition. New and ever-changing regulations related to Brexit and LIBOR, for instance, have added to the more than 4,400 regulations companies around the world face.
And while this has been happening, the strong tides that shaped digital technologies — in the last quarter of a century — have continued to expand. “The legal market is in a remarkable state of flux,” British author and speaker Richard Susskind notes in his 2017 book, Tomorrow’s Lawyers: An Introduction to Your Future. “In less than two decades, the way in which lawyers work will change radically. Entirely new ways of delivering legal services will emerge.” After all, Susskind adds, “it is simply inconceivable that technology will radically alter all corners of our economy and society and yet somehow legal work will be exempt from any change.”
Accordingly, general counsels (GCs) and other legal leaders must give serious thought to these opportunities from — and for — change. They must ask themselves how they can use legaltech, specifically, to focus their natural abilities and intelligence on higher-level problem-solving; extend their influence and help shape their companies, and create even more opportunities that support the office of corporate counsel and other departments.
Getting Outside Legal’s Comfort Zone
Former British Prime Minister Sir Winston Churchill was famously quoted as saying, “Never let a good crisis go to waste.” Crises are rarely momentous occasions and causes for celebration. However, successfully finding opportunities for development and growth within them is completely laudable.
In light of the coronavirus — and subsequent, unprecedented lockdowns — corporate counsels, risk officers, and compliance managers have been forced to think deeply about corporate governance and compliance, as well as contingency planning and preparedness around contract management. Due to the pandemic, “legal departments are seeing an increase in their volume of work related to labor and employment activities (44 percent), government affairs and relations (42 percent), and regulatory and compliance matters (39 percent),” according to Gartner. And this impact will be felt by companies in the foreseeable future.
At the same time, corporate governance and compliance matters have been impacted by post-Brexit regulations. Industry analysts have mused how the U.K.’s withdrawal from the EU would impact customs readiness, supply chains, and VAT/tax registrations. The expiry of the Brexit transition period is not without its corporate compliance implications, nevertheless. Legal teams and companies must review their own corporate affairs, and consider how Brexit will affect their corporate compliance and financial reporting obligations.
But that is not all. Hundreds of trillions of dollars of existing financial agreements will need to be amended in 2021. They make reference to LIBOR (London Inter-Bank Offered Rate), which will be replaced by SOFR (Secured Overnight Financing Rate) as of December 2021. In essence, loans agreed upon in these agreements use LIBOR to calculate agreement-based exchange rates. And although contracts that end before 2021 are entirely safe, those that extend beyond 2021 will need to change to varying degrees.
This transition from LIBOR to SOFR cannot be taken lightly by legal teams and companies; $370 trillion of existing financial contracts will need to be renegotiated quickly. Also, the “fallback clauses” in all-new agreements mean that appropriate adjustments need to be made to each contract.
Adopting the Latest LegalTech
Naturally, the changes noted above are no small feats in the absence of reliable legaltech. So, as they move forward after these societal shifts, GCs and legal leaders need to reflect on new learnings from each. Equally importantly, they need to decide how they will digitally enhance legal and other teams before, during, and after similar future shifts.
It is all well and good to identify technology deficits at first, figure out the level at which the legal department should be, and map out a solution. It is also worthwhile to highlight how legal digital transformation supports corporate strategy and business initiatives overall. However, that alone does not loosen the CFO’s purse strings. To do exactly this, it is best to also partner with a vendor to work out the cost framework and expected ROI from a digital transformation project.
Another Gartner study on legal and compliance automation showed that 89 percent of organizations either met or exceeded their expected ROI, after implementing legal automation or legaltech as part of their legal digital transformation. As long as the vendor or consultant is realistic or conservative, there is even a strong likelihood of meeting or exceeding the ROI proposed to the C-level. In fact, 42 percent of the cases recorded by Gartner yielded better-than-expected results.
The speed of technology deployment is another vital factor. Some large, fully customized systems can take 12 to 24 months to deploy. And this instills fear in the hearts of most GCs. Not only are such long-term projects perplexing and exhausting, but they also drain the resources of legal departments. As such, it is prudent to ask a digital transformation partner how quickly it can get an individual solution operational. A quick deploy model, for instance, can help legal and business unit staff gain momentum and make significant strides more speedily.
Interestingly, Gartner’s research reveals that the average legal automation payback period is 2.4 years. This is quite reasonable for key enterprise solutions. The other good news is that “73 percent of executives are very open or extremely open to investment” in legal automation and digital transformation projects. Because the chances of winning individual cases are rather strong now, GCs can feel confident in stepping up to the proverbial plate and acting as true business leaders.
In a future blog post, we will explore how legal practitioners can continue to be that leader within their organizations — with the latest legaltech. How they can help legal departments evolve from a complete cost center to a total value creator.
In the meantime, you can read our e-book, “Three Stages of Legal Digital Transformation,” to find out how to begin your own legal digital transformation. It includes many helpful tips for you and your legal team, including how to go about choosing the right legaltech vendor.
Author:
Sarvarth Misra
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