Updated: Jun 3
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% globally (Singapore 21%) 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 (including 40 respondents from Singapore).
The research comes at a time when economic and fiscal pressures abound, and as law departments face heightened risk, rising workloads and low morale from low-value, routine-work. Yet, many continue to use traditional delivery methods, despite reporting significant challenges with managing outside counsel and insourcing. Meanwhile, automated self-service options, co-sourcing relationships and centers of excellence appear underused. The most innovative are using a portfolio approach, combining strategies as part of a comprehensive and transparent effort to improve risk management, cost control and business enablement.
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 (global 65%, Singapore 62%) say they do not have the data and technology to respond to a data breach. More than three-quarters (global 78%, Singapore 92%) say they do not systemically track contractual obligations, and the majority (global 68%, Singapore 57%) 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 (global 88%, Singapore 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. The average cost saving being targeted among large organizations – those with more than US$20b in annual revenue – is 18% (global and Singapore). This represents a significant increase from the 2019 EY Reimagining the Legal Function Report, which showed large companies targeting savings of 11%.
Technological deficits and contracting inefficiencies
The report finds that more than half (global 59%, Singapore 48%) of General Counsel believe that greater use of technology is a way to reduce costs. However, only 50% (global and Singapore) of law departments have increased the use of technology over the past 12 months, and only 30% (global and Singapore) of in-house counsel say they have the technology required to do their job. More than eight in ten (global 83%, Singapore 80%) say they lack the skills needed to automate processes, while 41% of global respondents (Singapore 31%) 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% (global and Singapore) 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% (21%) over the next three years, but they anticipate a rise in headcount of just 3% (global and Singapore) over the same period. Also, three-quarters (global 75%, Singapore 85%) of legal departments say growth in workloads will outpace budgets with 87% of global respondents (Singapore 92%) saying they spend too much time on low-value, routine tasks. As employers fight to attract talent, almost half (global 47%, Singapore 45%) 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 (global 52%, Singapore 58%) of General Counsel believe their day-to-day work is aligned with the broader business strategy, and 57% of global business development leaders (Singapore 99%) 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% (global and Singapore) of General Counsel saying their department uses these services – up from 72% of global respondents who said so (Singapore 54%) in 2019.
Dmitry Tetiouchev, EY Asia-Pacific Law Leader, says:
“As we move toward economic recovery, enabling growth will be a crucial priority for organizations all over the world. If organizations in Singapore are to thrive and businesses are to remain compliant, law, procurement and commercial contracting departments will need to ensure they find the right balance of strategies between insourcing, co-sourcing, data and technology. Business leaders must elevate transformation of their legal departments if they are to operate efficiently, be competitive, and retain talent.”
Rishi Ballakhan, EY Asean Legal Operations Leader, says: “Legal departments face a hugely challenging and uncertain operating environment as businesses remain hyper-focused on revenue growth, with the faster pace of digital and regulatory change all adding to overall fiscal pressures. All the while, workloads are growing exponentially, and budgets continue to face increased scrutiny. In Singapore, too much of the legal department’s time is being spent on low-value, repeatable tasks, which prevents lawyers from becoming a strategic partner to the business.
“Legal departments need to transform their operating model to allow lawyers to focus on high value activities that drive revenue and better align with the business’s broader strategy. It is evident that legal departments in Singapore have begun the journey by, for example, increasing the use of co-sourcing strategies, but they must accelerate their efforts to transform their operations and invest in the right technology. Only then will they be able to keep pace with a fast-growing list of regulatory, cyber and operational risks confronting organizations today.”
For further information, please contact: Sophia S Mah, Associate Director, Ernst & Young Solutions LLP