How to juggle increasing business and regulatory complexity in the in-house legal team

The world certainly seems like a complex place at the moment. We’re navigating a business environment that’s not really ‘usual’ and where the new normal is fast becoming second nature.

Understanding — and appreciating — the complexities impacting the wider business helps your in-house legal team be an even more valuable function to the organization. After all, many lawyers move in-house to immerse themselves in the corporate world, so examining the origins of business complexity means being able to mitigate and find solutions to any challenges, both as a legal team and a business.

In this article, we’ll look at some of the main reasons for the increasing business and regulatory complexity legal teams are dealing with, together with some solutions on how to manage escalating workloads by being a more connected legal function.

The positive side to being complex

It’s impossible to talk about business complexity without mentioning the COVID-19 pandemic. While its impact is immeasurable, businesses are learning to recover, adapt and mitigate the obstacles delivered by new ways of working. There are solutions to many of the initial barriers, thanks to technology keeping the channels of communication open and organizations adopting connected workspaces, so everyone’s working from the same virtual page, no matter where they are.

Business complexity is always present, and rather than being a negative feature of an organization’s landscape, it often signals progress and growth.

Companies experiencing hypergrowth yield complexity at every level due to the very nature of maintaining a steady growth rate for more than one year. In-house legal teams are usually smaller than other departments and need to be strategic and proactive in scaling the legal function to match the growth of the business. Teams are also often dealing with ‘overgrowth obsolescence’ where the previous solution to a problem no longer works, requiring a new solution to be found.

Companies embracing globalization gain opportunities in new markets while simultaneously adding complexity on an international scale. For the legal team, that means a corresponding uptick in work centered around operations in a new region and the associated legal and compliance challenges.

Finding value in ESG

The continuous introduction of new systems, policies and procedures across the wider organization inevitably adds another layer of work to the in-house legal team. A great example is a new and improved focus on environmental, social and governance (ESG) criteria to measure a company’s ethical and sustainable efforts. Using data, intangible assets such as energy use, pollution, working conditions, contributions to the local community and managing governance conflicts, are measured, evaluated and benchmarked against a set of internal and external standards. Potential investors are particularly interested in ESG findings, using them to select companies with aligned values and to avoid the potential pitfalls of risky ESG practices.

As the gatekeeper of good corporate practices and ethical considerations, the legal department is well-placed to contribute to the development and evolution of the ESG plan and lead in determining risks such as regulatory sanctions, litigation threat, and corporate reputation. General counsels (GCs) anticipate the incoming workload; 85 percent say ESG will be a top priority in the future, with 63 percent predicting in-house legal teams will play a significant role in ESG activities.

Presenting the evidence

ESG is just one of the many areas where the expertise and skills of the in-house legal team ensure the smooth running of the business, contributing to an increased workload and the need to work smarter, not harder.

In the US, regulatory and legal complexity and diversity are increasing, a trend placing further demand on legal expertise and driving up the ‘temperature’ and energy required for legal work. The filing of Form 10-Ks is one way of assessing the complexity of a company’s financial performance. For example, over the past two decades, the number of references to Acts in 10-Ks increased from 40 000 in almost 5000 filings in 1996, quadrupling to 200 000 in over 9000 filings in 2006, and rising again to an annual rate of 300 000 in 2016. The average number of references in each filing also increased from 8.4 in 1996 to 31.7 in 2016.

So what does this mean? These numbers indicate extensive growth in legal complexity due to complicated legal rules and increasing regulatory temperature. It’s not just the volume of work that’s on the increase for the in-house legal team; it’s also the complexity of the work.

No sector is immune

While there are generic activities that every business has in common, there are also complexities that exist purely in specific sectors that call on the expertise of the legal function.

For instance take the healthcare sector, where legal teams operate in a rapidly evolving, highly complex and regulated environment. Responsible for local and national regulations, risk management and compliance, the legal function also deals with research collaborations, dispute resolutions, managing facility structures and healthcare reforms. There are also climbing rates of M&A throughout the healthcare sector and an increase in investments in predictive modeling.

In finance, including banking and insurance, the sector revels in a climate of high outside counsel spend and complex litigation, together with risks of data privacy and protection, security and cyber threats. There’s the increasing potential for AI to use the avalanche of data generated by the sector to understand customers better and a high interest in taking part in the digital transformation that is progressing rapidly in other sectors.

In-house legal teams in the software industry, including SaaS, deal with a broad range of work. Activities include outsourcing highly specialized intellectual property issues to external lawyers, dealing with sales transactions and contract negotiations in-house, and surviving in an environment of high growth, intense competition, M&As and IPOs.

Understanding the complexities of individual sectors helps understand how different sectors can adapt their legal function to meet the increasing demands – even when the budget seems to be standing still.

Doing more with less

When the finite resources of people, time and budget merge with the complexities of business, the result is often an unbalanced need to do a greater volume of work that is increasingly more demanding, with the same or fewer resources. In-house legal departments are already working under immense pressure. Over half of lawyers say they’re exhausted or highly exhausted, with workloads expected to increase by 25 percent over the next three years, yet most GCs do not expect budget increases to match.

Yet it’s somewhat reassuring that cost optimization/cost-cutting/cost transparency and managing a higher workload with the same number of employees was a high priority for 78 percent of those surveyed in a recent study. For context, other priorities were further internationalization of legal functions (85 percent of respondents), optimization of processes and workflows (84 percent) and providing proactive legal advice to the business (80 percent).

It’s time for a change

Legal teams have a massive opportunity to modernize and optimize how they work within their department and the wider organization. While technology is earning its position in the legal department, tech solutions are often not explicitly developed for legal, and therefore do not meet the unique needs of in-house legal teams.

Investing in legal technology means optimizing processes and workflows, leading to a more efficient legal department. It also means the legal department seamlessly integrates and connects with the rest of the business.

Other verticals in the business, from marketing to sales to HR, are already using a software solution to connect and unify their functions. You wouldn’t run finance without an ERP, and you wouldn’t run sales without a CRM. So if other business functions are using software solutions to manage their complex workflows, surely the legal department would also benefit from a more connected way of working?

Managing complexity by being a connected legal function

The key to managing increasing workloads and complexity and serving the wider business is adopting a legal tech solution to establish a single source of truth.

A legal workspace achieves this by providing a truly connected solution across all day-to-day legal workflow, including matters, contracts, e-billing and insights. With all legal work existing in the same place, a legal workspace provides a powerful system of record for the legal team and the wider organization.
Empowered by a single, unified source of truth, the legal function becomes one of the most efficient business functions, truly connected to the business.

We call this being a ‘connected legal function’.

Using the legal workspace, the wider organization connects with the legal department, submitting intake for triaging, accessing knowledge bases on a self-serve basis, using contract lifecycle management to track the status of contracts, and improving collaboration and transparency.

Being a connected legal function means having true visibility over all your work, being productive, showcasing the legal team’s value and creating better business outcomes. You’re able to deal with and be proactive in an increasingly complex business and regulatory environment, both within your legal team and throughout the wider organization.

Link through to LawVu’s webinar series ‘Creating a Connected In-house Legal Function’ to see what our customers say about unifying legal work, expanding the single source of truth and how to leverage data to more effectively partner with your business.