It all starts with the right mindset
When we look at the 2021 EY Law Survey we detect only few General Counsel reporting ‘being very confident’ in their departments’ abilities to manage complex risk, although it is one of the areas where CEOs expect to implement lots of change over the next three years. This suggests a certain aim to manage major risks more closely, but are legal departments ready to take on that challenge?
The current situation yells: no. Today, there is a lack of data-driven approach in legal departments. Far too many organizations miss out on accurate and up-to-date information of their legal entities, nor do they have the data and technology to effectively respond to a data breach. Gaps in process management and underuse of technology are limiting organizations’ visibility into risk and the contract creation process isn’t standardized, meaning contracts aren’t monitored for deviations from standard terms, nor are they systematically tracked for contractual obligations… This lack of process management and technology-assisted monitoring creates a broad range of risks that ripple through corporate supply chains and client relationships. And although organization are trying to develop personal systems, there aren’t many who succeed in finding a solution…
When it comes to contracting, organizations lack decent overview.
Far too often legal departments have no overview when it comes to contracting. There needs to be a greater alignment for who’s responsible for contracting processes to achieve meaningful contract transformation and organizations should reconsider their technology and sourcing strategies to deploy their people and resources in the most appropriate way. Inefficiencies in contracting processes have a negative impact on the entire organization, including potential loss of business. Therefore, legal departments can be assisted by Artificial Intelligence-based software, like Luminance, to reorder contracts that were sealed in the past and to manage newly added data in the appropriate way from here on. By reducing inefficiencies and building consistencies the legal department will show the added value the business is desperately in search for and receive the necessary budgets to build out a lean and agile legal department that lives up to the expectations.
Give legal the opportunity to be more decisive in complex risks.
Of course, there is always a first step: analyzing legal operations. The legal department needs to be aligned with the purpose of the business and set priorities. Do this by implementing building blocks: define who is responsible for leading change, drive standardization and consistency, focus on the right technology challenges and give the right work to the right people. You want to have a data base of self-service contracting. Intuitive, user-friendly, and without expecting great IT-knowledge from its users. Not a map of Excel-sheets consisting a tangle of different clauses and agreements, that isn’t clear and asks a huge amount of time when time isn’t in your favor.
Legal can’t be seen as a weight for the organization but is often so by the business-side. With the right tools and people, the legal department can be a great asset for the organization. EY’s Legal Managed Services is able to partner up with the legal organization for aligning with the business strategy. This by offering back-office help to keep off the pressure of legal operations and setting up the right structure to grow in the future. By setting up building blocks legal can be more decisive with complex risk projects and bring more value to the table. The low complexity work can easily be standardized or outsourced to a legal service provider, and since some legal departments have been impacted in size during the pandemic outbreak this isn’t a poor solution.
It’s clear when not having the reliable technology or resources for legal entity management, the risks can be severe. They can also form a barrier to strategy execution. The need of a well-resourced team, supported by the best and most appropriate technology, capable of lowering overall costs and reducing organization’s risk exposure, is significant.
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Summary
To address the priorities of the business and overcome their own barriers the operational model of law departments needs to change, proving their added value. This means applying an organizational structure where legal departments have a data-driven approach, use technology the right way and standardize their processes as much as possible. When having the right tools and people, legal can be a great organizational asset, rather than being just an organizational obligation…
