EY Law study reveals disruptors prompting the evolution of legal departments and the key barriers to change

• External disruptors posing significant challenges for today’s legal departments: geopolitics, regulatory pressures and technological advancement
• An increasingly diverse mix of sourcing strategies is being used to achieve greater efficiency and access specialized expertise
• Three out of four legal departments are refining their legal technology and data strategies, but only 25% are prioritizing the use of GenAI

Geopolitics (76%), the regulatory environment (75%) and technological advancements (74%) are the top three external challenges facing legal departments and are creating seismic shifts in the global corporate landscape. In response, legal departments are facing growing pressure to develop the expertise, speed and agility needed to handle increasingly complex matters, yet internal pressures are slowing progress toward the necessary evolution of the legal department.

This is according to the 2025 EY Law General Counsel Study, “Amid disruption, how can legal departments innovate with confidence,”, for which EY surveyed 1,000 general counsel and chief legal officers from organizations with US$1b or more in annual revenue across 21 countries, including in-depth interviews with legal department leaders.

Among the leading barriers to change are budget constraints, with 83% of responding legal departments expecting budget increases in the next year, while at the same time, 87% report that cost reduction is a top priority. Limited budget is the most commonly cited challenge for legal department sourcing (61%) and technology strategies (65%).

Technology as an enabler for change

Notwithstanding budget constraints, refining technology and data strategies remains a high priority. Seventy-five percent of responding legal departments say they are developing or refining their legal technology or data strategies, as many report challenges with disorganized data (52%), disconnected legal and business platforms (44%) and limited access to accurate data (41%). However, only 25% of respondents report that using generative AI (GenAI) is a high priority for the legal department.

Dan Hendy, EY Global Legal Transform and Operate Leader, says:

“Technology is often treated as the driver of change rather than an enabler, so it frequently fails to be truly impactful. To make better use of limited budgets, rather than going straight to the most leading-edge technology, legal departments should first develop a clear understanding of the business needs, problems and opportunities that require support. By focusing on how they are setting their strategy, legal departments can then shape how to allocate budget, source work, engage talent and use technology to enable – rather than drive – change.”

Navigating regulatory compliance and risk management

With fast-moving developments in areas including artificial intelligence (AI), data privacy and sustainability, regulatory compliance is a priority for most legal departments (93%). However, monitoring for regulatory change across jurisdictions (60%), providing guidance where regulations are unclear (50%), and accessing data needed for risk management or reporting (48%), are among the top barriers to addressing regulatory complexity.

The study also uncovers that while 81% of responding legal departments expect their organizations to increase investment in risk management, only 49% have a risk governance and operating model and less than 30% have documented the critical components of a risk management program. This presents an opportunity for legal departments to play a critical role in improving risk management by helping foster greater clarity and alignment across the business.

Diversifying sourcing strategies and increasing talent engagement

While 75% of respondents acknowledge that they are rethinking their sourcing strategies, only 21% have conducted a review of their internal and external practices in the past year. Notably, all legal departments surveyed say they are seeking access to additional expertise, yet they face significant challenges, with 45% struggling to secure support across necessary jurisdictions and 55% encountering regulatory or compliance issues. Many of the legal departments surveyed are increasing the use of Big Four organizations or alternative legal service providers (60%), and increasing the use of internal business service centers or centers of excellence (53%) to achieve greater efficiency and access the expertise needed.

Sixty-four percent of legal departments surveyed plan to source additional expertise by upskilling or reskilling current talent. As a result, talent retention is a high priority for 57%. However, only 50% of respondents are providing career advancement pathways, just 35% are expanding wellbeing programs and less than a third (30%) are increasing development and coaching programs.

Hendy says: “Law leaders should be proactive in taking steps to ensure they are focusing on initiatives that will truly make a difference for their teams. The rapid evolution of GenAI and agentic AI will be a big factor in shaping the legal department of tomorrow, and businesses should be working through how they will develop soft the skills and expertise required for today’s talent to prepare for the future.”

-ENDS-

Notes to Editors

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